The text has several parts called
Books. This is a draft of Book 4 dated 2009-05-10. It is is
open for vetting and comments by email
to the author. The file is updated from time to time. You can ensure that you
have the most recent version by checking "Current project" at www.zetterberg.org.

The
Money-Centeredness, the generic life style of the economy, is focused on
wealth. The Money-Centered persons are concentrated on making money, saving
money, investing money, and, not to be forgotten, to spend money. Quick to spot
their own needs or the needs of others, they scan the horizon for value for
money, be it in traditional goods and services or in novelty, in quality, or in
outright bargains. They may be quality consumers, or bargain consumers,
pioneering consumers, or consumers of the tried and true. Producing or
consuming, they know prices, and they can tell what is profitable or not. They
usually spend more time on the advertisements and business news in their media
than on politics and culture.

In Book 1 of The
Republic Plato and a circle of people discuss what is "right," in
some translations called "justice," that is, the legal and moral
commandments that concern different roles and parts of society. Socrates asked Cephalus, a businessman of the third generation, who had
created a larger fortune than the one he had inherited, what was the greatest
blessing that his money had brought him. Cephalus, an
aged man, looks back on his life in business, and says he has not had any
reason "to lie to or cheat others, whether inadvertently or
deliberately." These are the thoughts of a man who suggests that
throughout his life he has entered business deals based on honesty and
voluntariness, that he has always kept his part of agreements and has repaid all
debts. He can therefore meet death with peace of mind.

Socrates thought that
this was well put, but was still not satisfied with the answer. Not because he
doubts Cephalus or suspects that he is just a cheap crook,
but because answers from the business community cannot be generalized to hold
for all of society. He gives an example which shows that good business ethics
do not always apply.

“Justice, what is it? — to speak the truth and to pay your debts — no more than
this? And even to this are there not exceptions? Suppose that a friend when in
his right mind has deposited arms with me and he asks for them when he is not
in his right mind, ought I to give them back to him? No one would say that I
ought or that I should be right in doing so, any more than they would say that
I ought always to speak the truth to one who is in his condition“.

Faced with this
difficulty, Cephalus thought it best to leave the
conversation. But the gathering agreed that "a friend should always do good to his friend and never do him harm." Plato had
thus revealed that moral dictates in the economy are not only different from
those in the socially small
world of friends, but that some of those dictates can conflict with those
based on friendship. We can generalize this in modern terms to mean that the
discovery of the basic social norms of the business world differ from and in
some cases conflict with those of the civil society. (Here I use the term
"civil society" in its present meaning to connote family life,
neighborhood circles, associations, religious and cultural life. In
antiquity, "civil society" meant something quite different that was
more in line with the realm of body politic.)

The dictates of the
guards also differ from others. Socrates asks: "Is then the best (man) to
watch the camp the one who can sneak into the enemy's camp?" The gathering
responds, "Of course:" For a guardian, stealing the enemy's plans is honorable.

Plato's norms for
statecraft and business have been effectively updated by Jane Jacobs (1992).
Like her antique model, Jacobs uses the form of a dialog. She regards the
problem of whether or not to return the deposited weapon as a gulf between the
commercial moral syndrome and that of the guardians: not to return the weapon
is seen “as a form of policing” (p.30). Jacobs is forced to this conclusion
inasmuch as she does not acknowledge that civil society has its own moral
syndrome, which differs from the syndromes of both the guardians and
businessmen. A slightly modified version of Jacobs that includes also some
norms from Moses is given in Figure 20.1. Under the heading "Civil
Society" we list three universal
candidates from the Decalogue.

BUSINESS:
Create wealth
Reach voluntary agreements
that are advantageous
Respect contracts
Compete
Never use force
Be open to all information
Cooperate with foreigners
Take initiative and be enterprising
Look for innovations and inventions
Invest in effective production and trade
Be industrious

CIVIL SOCIETY:
Do not lie
Do not steal
Do not kill

STATECRAFT :
Maintain order
Use force effectively
Maintain discipline
Respect the power hierarchy
Be loyal, promote the loyalty of others
Do not enter into business deals
Use information selectively
Be generous in order to attain goals
Enjoy pomp and circumstance
Stand up for your rights and honor
Be courageous

The oppositions between the norms of
the state and business are usually not apparent, but they are obvious to an
inquiring Socrates. In the civil society we may assume that compassion is to
rule, not the dictate of business to compete. In the civil society one shall
not lie, steal or kill, but in the name of the state the soldier is commanded
to deceive, steal from, and kill his enemy. Such conflicts, as familiar as they
are irreconcilable, have always plagued sensitive young people in
differentiated societies.

It is significant that
the three norms in the civil society that we have listed from the Decalogue are
fully compatible with the norms of business but not of the polity at the time
of war.

For at least a couple
of centuries the economies of the great civilizations have exhibited all the
attributes of full-fledged societal realms. These attributes, dressed in
modern words, are shown in Figure 20.2. The headings in this table are the same
as we used in presenting science and art. But the illustrations are different
for we are now dealing with the economy.

The
letters marking the rows are those found in a summary of the various
language-products in society called Table of Societal Realms in Chapter 9. The
letters after "I" continue as columns to make space in the center for
some illustrative examples.

Each cell in this table deserves a
thesis of its own describing how it contributes to wealth. Here we must be
selective and will only look at a few cells in the columns J through P.

Wealth can be created
in many ways, from gathering, hunting, fishing,
cultivating the earth, mining, collecting war booty, or cutting the hair of
your fellowmen for a fee. An agriculture that produced more than was needed for
the sustenance of the farming household, so that the surplus could be traded,
was the main base of wealth in early times.

Apart from agriculture
and trade there are three dominant modern ways to produce wealth:
manufacturing, services, and finance. The first deals with material goods such
as kitchen utensils and cars and other forms of "materiality"
produced in factories. They are assigned monetary value when bought or sold,
when the materiality changes hands.

The second way,
organized or personal services, are not produced in factories but in
households, shops and offices. Services can be traded for money and have
markets just like goods from factories. Unlike goods, services can usually not
be stored in inventories; a haircut is consumed at the same time it is
delivered. So is a transport of people or goods. A service may, however, be a
standing entitlement. Then it is available when you draw on it. For example, a
health insurance gives you the services of a doctor and a hospital when you
need it. The service economy in a mature capitalist system actually employs
more people than manufacturing.

The third modern road
to wealth is finance, a very special service that must be treated separately
from other forms of service. It makes money with money. Monetary instruments,
papers with texts and numbers, so-called "immaterial" values are created,
bought and sold. Many of the symbols communicated in finance are what we called
Saussarian,
i.e., refer to other symbols to get their meaning. A string of them may easily
loose contact with anything expressed in down-to-earth Meadian
symbols. Some financial interactions thus take on qualities of what we know as hyperreality.

Like any other
societal realm the economy has an anatomy of organizations and networks. Among
the organizations found in an economy are households and firms. The main actors
in an economy are firms involved in agriculture, trade, manufacturing,
services, and finance. Note that these major economic actors are organizations,
not individuals. They enter and interact in the networks we call markets, and
these interactions are what is called trade. Of course, individuals also trade.
One person who strikes an economic transaction with another person is actually
the most common illustration in the elementary textbook of economics and also
in much abstract economic theory. But in real life in a modern society, the
market of "individual-to-individual" is not as big as
"firms-to-individuals." There is also a huge market for
"organization to organizations" — it includes
"firms-to-firms," and the huge subclasses
"firms-to-households" and "firms-to-governments."

7:7.
"The Netorg System of Realm
Expansion"

A cardinal value and its societal
realm extends its reach
(a) when networks dominate over organizations in the realm, and
(b) primarily when networking organizations dominate.

A firm usually has
many more customers than employees. This is typical of a modern economy as a
societal realm: its networks are bigger than its organizations, i.e. the
markets are bigger than the firms. This has not prevented some multinational
companies to grow very large and rich; some have more employees than have small
states, and several are richer than the poorest states. Contrary to much
libertarian thinking and particularly contrary to Ayn
Rand’s doctrines, it is not individualist systems of pure market transactions
that create most wealth. According to our Proposition about The Netorg System of Realm Expansion, “networking
organizations”, i.e. corporations working in markets, are the most successful.

This Proposition also
makes clear that firms stagnate and become defensive rather than expansive when
they grew into monopolies or near-monopolies that become more or less immune to
market forces and crowd out the market from the economy.

Corporations are run
by a leadership that includes a Chief Executive and a Corporate Board. A modern
board has members who represent shareholdersas well as members from the
outside society.

An ideal corporate
board should have creative and constructive members who are totally committed
to look out for their corporation and not for themselves, members who make an
effort to know the situation of their corporation and its branch. The ideal
board may include someone knowledgeable in business history who
can see when old stupidities are revived. Corporate boards may also have use
for some skeptic from “the school of hard knocks,” (or from science or
journalism) who can reveal argumentation which is more persuasive than sound.
Also, a board needs members who are totally unimpressed by well-known persons
from firms that have made much money on upticks when they think that they are
competent to handle any downturn or off-beat situation. Consider also in
recruitments to a board what a difference ethically responsible people can make
to the quality of board decisions, be these persons morally gifted by nature,
or persons who have struggled enough with issues of honor to become moral
virtuosos. But such a member should not be put there for his or her PR-value.
Lehman Brothers had apparently little moral help from a board member who
was a former head of The Red Cross.

Recent events tell
that corporate boards ought to have a member or two who understand politics to
the extent that they can grasp the consequences of misguided bipartisan efforts
to promote home ownership. One can also imagine what difference it would have
made during the build-up to the 2008 financial crisis to have had a board with
a member with enough mathematical skill to analyze a derivative equation and
put reports and promises by salesmen of derivative bonds to task.

When all is said and
done, there is no substitute for a board member’s good judgment. The good board
member is not bound by prestige: If you do not know, you can ask. Any board
member of a financial institution in Switzerland or elsewhere could have asked
about the risks of American derivative housing bonds when the proposal of
acquisition of such securities reached their board for final approval. When
told that the risk had been calculated both by the issuer and the rating
agencies by David X. Li's “Gaussian copula function,” the good board member
could have asked about this formula. The answer would be that this formula in
one and the same number summarizes all risks for the security. Yes, the same
number for risks in both upturns and downturns. Yes, the same number for the
risk assessment of these bonds is valid both when the prices in various local
markets are different and when they rise or decline in the entire USA. The
inquiring board member should then have had little difficulty in concluding
that his institution was dealing with a charlatan.

Such a board member
did not exist in reality. Much good recruitments are blocked by a special
criterion for new members of a typical board. It is considered essential that
the candidates are reliable and trusted by the other board members. The
candidates are simply not chosen if they question the extraordinary
compensation packages that prevail for the leadership in modern corporations.

Functionaries in the Economy

Entrepreneurs are the
Makers of new wealth, a creative breed of people. Without them most of us would
be poor.

The foremost Keepers
or custodians of wealth have traditionally been bankers. Banking is a keystone
in the economy, both in centrally planned ones and market economies. Bankers
are popularly known as people who lend umbrellas in sunshine, and ask for them
back when it rains. Thus they make the cycles of fortune for entrepreneurs,
traders, and consumers easy in good times but harder in bad times. They are not
always a major cause of business cycles, but as a rule they make them worse.
The bankers are balanced by their cousins among the Keepers, the insurers, who
collect premiums in good times and pay out when disasters happen. These conventional
images of bankers and insurers have become less valid. Shortly we shall show
how their own entrepreneurship and inventiveness have changed the roles of
bankers and insurers.

The Brokers, wholesale
or retail, are responsible for making the economic world go round. Trade, not
raw materials, farms, or factories, is the fundament of a market economy. If
and when trade is in place, the extraction of raw material, farming, and
manufacturing can flourish.

Many carry an image
that the manufacturing factory is the basis of capitalism. However,
organization of factories for production of goods is a mark of
industrialization, not capitalism. Capitalism depends on trade and markets, not
only on factories, which are found also in pre-capitalist and socialist
economies.

The realm of the
economy in a society rests on exchanging sentences that include executive
evaluations such as prices and costs. The economic
realm is dedicated to creating, preserving, and using wealth. There are
different paths to wealth, and competition is the stuff of business. Today
business practice includes record keeping of all transactions, for example
goods and services that have been bought or sold, as well as standardized
measurements of profits, capital, and cash flow. In this sphere one seeks
freedom of trade, the right to establish one's business where one wants, to do
business with all kinds of products and services and over all boundaries.

To learn more about
wealth let us place it in a semiotic square along with its opposite, poverty,
and its degeneration into swindling and miserliness (Figure 20.3). Let us first
consider wealth and its measure in the form of money.

Wealth and poverty are
opposed. Both can be expressed in absolute or relative terms. To have exactly a
million dollar in 2006 (the time of this writing) makes you just so rich in
absolute terms. In relative terms you are then one of 8.3 million dollar
millionaires in the United States. In this case there are 2.8 percent of the
inhabitants of the United States who are richer than you. If the number of
millionaires decreases or increases your relative wealth becomes greater or
smaller, but your absolute wealth stays the same. Likewise, if you move to a
poor country with your million dollars, you become a much richer person in that
country than in your American home country. A person or a group of persons may
become richer in absolute terms but poorer in relative terms. Or poorer in
absolute terms but richer in relative terms. The failure to specify which kind
of wealth and poverty we are talking about has caused confusion and needless
acrimony.

Most people see riches
as the number of rooms you have in a house, the size and make of your car, the
content of your jewelry box, and the elaboration of you dinner menu, the
quality of the services you enjoy, and other visible matters. But technically
speaking, wealth is not things or services but the evaluation of them.
In any advanced society wealth is evaluated in money, and money is measured by
a currency scale.

A currency scale has equal and interchangeable units; a
dollar is a dollar at the low end of the scale and at the high end of the
scale. And there is a fixed zero-point; it shows that someone has no dollar to
his name or that a firm has no cash and assets of its own left, i.e. is
bankrupt. No scale of honor is so precise.

No other realm in
today's society has scales of its cardinal values with zero-points and equal
and interchangeable values. In the body politic there are approximate
quantitative measures of power according to the number of votes for a
politician and his party in elections. In science there are the count of the
number citations received by a professor and his laboratory in scientific
journals. However, political power and scientific competence also have other
sources than popular votes and citations; here ratings must be supplemented by
"good judgments" of those in the know. In the economy, by contrast,
you can establish the net worth of an individual or organization and express it
in a currency; you need no other information. In the case of firms, quarterly
and annual balance sheets, certified by accountants, do the job. This is an
obvious advantage for the economy in the ever present competition between societal
realms.

The currency scales of
evaluation employed in the economy are different and more sophisticated than
scales of honor and achievement used in other societal realms. The former draw
on the language brain like the others, but it also uses the mathematical brain.
Economic evaluations are expressed in symbols that can be treated in arithmetic
operations by producers, tradesmen, and consumers, and also by more advanced
mathematics in finance. This fact has lent a special aura to the economic realm
in society that is not necessarily commensurate with its relative contribution
to society.

Money has long has
been a universal unit of exchange in everyday life for individuals, households
and organizations also in the realms of polity, science, art, religion, and
welfare. People active in science, the body politic, art, religion, and welfare
are rewarded both by honor and by money. In business there are few honorific
rewards, and the reward system is in effect based on money and money alone.
Government officials, scientists, artists, priests, and welfare executives have
total rewards that consist much less than 100 percent of sheer money; the
balance is honor. When rewards in the economy being practically 100 percent
money are compared to rewards in the non-economic realms, a sense of resentment
is close at hand. We can, for example, expect much public anger directed at
extensive “compensation packages” for top management in those modern societies
in which politicians and labor unions have destroyed the honorific reward
systems in the name of equality.

Poverty as we
have come to perceive it, say, in large parts of Africa and on the Indian
subcontinent of Asia, has been the normal state of mankind throughout its
entire history. Wealth have been very spotty and found along some fertile river
valleys, trading cities, royal courts, and aristocratic mansions. The
eradication of poverty on a larger scale has a history of only some 200 or 300
years.

As part of its
millennium goals for mankind the United Nations expressed that the number of
poor be reduced by half by the year 2015. All member countries and all the
world’s leading development institutions agreed on this goal. Living under one
dollar a day was used to define poverty. This is an absolute measure, but
ambiguous; the dollar fluctuates in purchasing power, and the definition of the
poverty level must in principle be adjusted every year.

Poverty, like wealth,
is expressed either in absolute or relative terms. Paucity may be reduced from
one year to another in absolute terms, but increased in relative terms.
Relative poverty depends on the rest of the income distribution. To measure
poverty in relative terms you may ask for the percentage of total wealth that
is possessed by the lowest ten (or some other low number) percentiles of the
population. The United Nations did not declare any goal for the reduction of
relative poverty in the world.

The world average of
absolute poverty is being reduced at a rapid rate, not because any UN
directive, but because institutions of private property, rule of law, and
freedom of trade has allowed entrepreneurs grow in number, hire many, and pay
wages high enough to raise entire households over the poverty level. At the
time of this writing, it is primarily due to China's rapid development that the
world figure on reduced poverty shines.

Looking to the right
side of the semiotic square of wealth (Figure 20.3) we meet economic swindlers
who engage in deceptions for personal gain. The oldest form is the use of counterfeit
money. In a typical modern con game the swindler is not as rich as he (or she)
pretends, and the presumed wealth is used to draw those who are richer into
schemes that transfer their money to the swindler. F. Scott Fitzgerald novels The
Great Gatsby and This Side of Paradise revealed swindling and
questionable identities on more than a petty scale.

Max Weber rules out
personal greed as useful in the definition of capitalism:

‘Acquisitiveness’, ‘striving for
profit’ — for profit in terms of money, for the largest possible pecuniary gain
— have, as such, nothing at all to do with capitalism. This endeavour
has existed and exists in waiters, doctors, coachmen, artists, prostitutes,
corrupt officials, soldiers, brigands, crusaders, gamblers, beggars, indeed one
might say in all sorts and conditions of men, during all periods in all
countries of the world in which the objective opportunity to do so has been or
is in some way available. It is part of the ABC of cultural history that one
should, once and for all, refrain from this naive definition of concepts.
Unfettered acquisitiveness is in no way tantamount to capitalism, and even less
with its ‘spirit’. Capitalism may quite simply be synonymous with the
subjugating or at least the rational tempering of this irrational instinct. But
capitalism is indeed tantamount to the quest for profit — in continuous,
rational capitalist business operations; for constantly renewed profit; for remunerativeness — since this must be so. Within a
capitalist order that embraces the whole economy, an individual capitalist
company would be doomed to failure if it did not orient itself according to the
chances of achieving remunerativeness. (Weber
1922b/1986, p. 31)

Personal greed may not
be the motor of capitalism, but it is the sure source of corruption in
capitalism, as it is in other systems. The long version of the tenth
commandment reads: "You shall not covet your neighbor’s house; you shall
not covet your neighbor’s wife, or male or female slave, or ox, or donkey, or
anything that belongs to your neighbor." If it had been written in
capitalist times it would have included another clause: "You shall not
covet the cash flow of your employer, or his suppliers, or his
customers." Top management of other people's factories, offices,
wealth, and assets are the new robber barons. In the first half of the
twentieth century they began to replace owners as day-to-day leaders of firms (Berle & Means 1933). In the second half of the century
they formed the majority of most corporate boards. This made for professional
governance by graduates of business schools. It also paved the way to the
practice of non-owners to give fanciful "compensation packages" to
each other. To covet the cash flow of one's employer is an ever present
temptation to enrich oneself, for all employees to be sure, but particularly
for modern management.

A swindling process
that became highly visible in the United States about a half century ago has
spread to other capitalist countries. Though a process of institutionalized
evasion of norms it has become widely acceptable. The boards of the larger
corporations and their chief executives is a network, as described in Chapter 6, that is formed around a common
identity of participants. This particular network has developed into an
informal Fortune Creating Circle that
anoints (i.e. installs and blesses) their members with fortunes. These fortunes
are built by regular honoraria and salaries, perks of many kinds, year-end
bonuses, stock options, huge pensions, and/or anything else that may fit
compensation packages. In recruitment processes to the top, the issue is always
raised: “Can we trust him (her)?” This query may be a code for several things;
it always includes, explicitly or implicitly, the candidate’s loyalty to the
general level of compensation and its annual rises are current within the
Fortune Creating Circle. In early capitalism you had to be the owner-entrepreneur
to reach high fortunes. In the mature capitalism it is enough to be top
management and/or board-member.

Critics call the
Fortune Creating Circle “a culture of greed.” *Government officials who are set
to run socialized enterprises are rapidly drawn into its reward system. The
same seems to be true when official from labor unions join the boards and
participate in the setting up of compensation packages for executives and
fellow board members

With the advent of
money documented only in computerized accounts, economic swindling of big
corporations and government institutions has become easier for the technically
proficient. The possibility to have inappropriate transactions outside of
balance sheets without mentioning them in footnotes — sometimes in collusion
with accountants — provides a golden opportunity for high-level corporate
swindlers.

The borderline between
sophisticated banking and swindles became blurred when firms on Wall Street invented a combination of "derivatives,"
"securitization," and "off-balance-sheet accounting with special
purpose entities". *They were innovative financial products that
unexpectedly crippled the world's banks in 2008.

Anything that has
reasonably regular payments — installment debts on credit cards, mortgages, car
loans, aircraft leases, toll payments at super-highways, music royalties — has
long been used as collateral for a an advance in the form of a loan. An
innovation is to make such transactions by securitization. A trust is set up by
a bank to receive the money from such collections. The trust issues bonds and
pays bondholders interest, and at the appointed time, the principal. So far so good. Combinations of mortgages from different
districts and from home owners with different credit ratings can be combined
and packed as a "derivative" and also sold as a bond. Obfuscation is
close at hand with securitization of derivatives. Here starts much trouble. The
risk and value of such bonds is in principle calculable, but in practice
difficult to calculate. A swindle begins with an assertion to the buyer that
there always will be a market and a fair price for such securities.

The trust, or what
remains of it after initial sales of any bonds, may get off the books of the
bank by including it in a so-called special-purpose entity, preferably
incorporated in a low-tax place such as the Bermudas
or Cayman Islands. With this innovation in off-balance sheet accounting, the
bank no longer eats into its capital requirement for further lending. The bank
merely books profits from such lending transactions. It does not have the
normal costs for increasing its base of own capital when lending more, nor the
risks of defaults in the stream of payments from credit cards, mortgages, or
whatever was included in the trust.

Is securitization of
derivatives combined with off-balance sheet accounting a swindle or just
financial inventiveness? Joseph Stiglitz, professor
of economics at Columbia University, had his view formulated at the beginning
of the bank crash of 2008 when on October 21 he told a congressional committee,
that this "securitization was based on the premise that a fool was born
every minute. Globalization meant that there was a global landscape on which
they could search for those fools — and they found them everywhere."

Most of these fools
born every minute have birth certificates in the form of MBA-degrees from
business schools. After the turn of the century there has emerged an
unfortunate conformity in curriculum and attitudes of the business schools and
their student bodies. Business school graduates the world over were given
unrealistic birth rights to expect excessive compensation packages. But the
main problem with these schools is wider.

In a Many-Splendored
Society an MBA-degree should be considered de-meriting until the business
schools learn, not only to better separate swindling
from wealth creation, but learn to better see business and economy as a part of
a total society in which other societal realms are their equals. To get rich is
not anything superior to the holding of political office, have scholarly
competence, deliver artistic beauty, or to carry sacredness or virtue to your
community in the course of every-day living.

Looking to the left
side of the semiotic square of wealth (Figure 20.3) we meet misers. The typical
miser hoards gold and other symbols of rich and does not spend money on
investments or charities. Misers are stingy also when it comes to buying
comfort for themselves. They do not want to reveal
that they are wealthy.

It is not illegal to
be a miser. Morality rather than law is invoked to cope with miserliness. But
the moral message is mixed. Many moral doctrines actually say that it is better
to save money than to spend it. But are hoarders of money actually nobler than spendthrifts?
On a personal level they may or may not be. But on the societal level they are
not superior according to the rationality of economics. A nation of misers is
not conducive to economic growth; too many trades that add to wealth are simply
left undone. People do not notice businesses that do not start so we never know
the damage done by misers.

Moral doctrines that
affect misers hold that you must share your wealth with the poor. Dickens'
master miser, Ebenezer Scrooge, is rewarded with happiness when he finally does
so. However, there are also moral arguments to the effect that providing
workfare is better than providing welfare in the form of the dole. A job gives
a person new social encounters at the workplace. It gives discipline to the
individual. It gives taxes to the body politic, something appreciated by
politicians. Public welfare carries big costs for the body politic. But welfare
legislation gives its promoters among democratically elected politicians many
votes.

Philanthropy is not
the same as charity. Charity is giving to people who are without food,
clothing, shelter and the other necessities of life. Philanthropy is giving
donations to projects and institutions within the areas of culture, science,
religions, health, and others that lack sufficient sources of revenue from
taxes or sales. Philanthropists can be private citizens, non-profit
organizations, companies, or foundations. Individuals may donate their time as
well as money. Their names may appear on bronze plaques in buildings, on a page
in a theater or concert programs, in the title of a professor’s chair, in the
Foreword to a technical book, next to an exhibition in a museum. Foundations
are the most sophisticated forms of modern philanthropy.

Tax legislation is
decisive to philanthropy. In the United States at the time of this writing, a
philanthropic foundation must give five percent of its total resources
(capital, interest, dividends, and capital gains) annually according to its
charter, or, send this money to the tax authorities. Interviews carried out
among the many private individuals in New York who are philanthropists (Ostrower 1995) included a question as to whether the
deduction for contributions should be eliminated and let the state use the
additional tax revenues for the philanthropic projects. One of the respondents
answered “If I wanted this I would move to Sweden." Any country sensitive
to the detailed needs of its population should have legislation that encourages
and facilitates philanthropy. Ministers for culture, research, health, and
education may assume omnipotence and promote the idea that they, themselves,
can meet all needs of their society through political channels. Surely they can
do much, but we can extend a well-known thesis thesis – Hayek (1954) – and say that they don’t have information
about all that has to be done. There is always room for private philanthropy.

The economy is a
continuous exchange or distribution of belongings, or rather their
representations in the form of property rights. The most common exchanges are
between money, on one side, and titles to goods or of services, economic or personal,
on the other side.

We know from our
discussion of Hohfeld (1913) that any right is defined by four
conditions: claim, liberty, power, and immunity. The ‘claim’ is an explicit
expectation that others should accept my actions. The ‘liberty’ is the
expectation that I have other options and am not forced to do everything I have
a right to do. The ‘power’ is that I am allowed to do it as long as it does not
violate the rights of others. The ‘immunity’ is the expectation that others
will respect these rights of mine. These four expectations in exchanging goods
and services are formalized in the right-hand column of the dialog below. We
recognize them as one of the most important impelling vocabularies of
contemporary living. We discussed them in Chapter 11 and exemplified with the
right to learn English.

In the left-hand
column below we record everyday words in a dialogue that takes place when we
buy a car from a car dealer In the right column we
enter the needed analytic concepts. We use X=buy/sell a car.

In the right column we
have Hohfeld's distinctions supplemented in three
ways. First, by separating the goods involved in a
transaction from the title to the goods. This is a more recent development
in economic theory than Hohfeld's days: we now talk
about economics as the exchange of titles to property, rather than as the mere
exchange of actual belongings. Second, by separating transactions that involvebarter, money, and credit.
The growth in the credit economy has been enormous since Hohfeld
wrote his analysis. Third, by including guarantees.
Consumer protection has also greatly advanced in the modern economy.

Epic language

Emic language

Driver: Please,
sell me a car.
Dealer: Yes, I am a car dealer.

Ego: I have
a claim that Alter does X.
Alter: I have a duty to do X.

Driver: I
can choose you or someone else tosell me a car.
Dealer: Yes, you don't have to buy a car from me.

Ego: I am at liberty do or not to
do X.
Alter: I have no claim that Ego does X.

Dealer: If
you do buy it from me it will cost you Y dollars.
Driver: I want to leave my old car to you as part of the deal. And I will
pay you in installments. and give you Z dollars in
down payment.

Ego: I
want the title to X for Z money, the barter B, and the
credit C.
Alter: The title to X is yours in exchange for Z money, the
barter B, and the credit C

Driver: I
can use the car that you sell me any way I wantexcept recklessly
against any other vehicle or person on the road since that would violate the
latter's claim to be safe from such attacks.I may drive the car, let
someone else drive it. When the credit is paid off I can rent it out for
money, sell it, give it away, destroy it.

Dealer: I do
not care how you use the car that I sell to you.

Ego: I have the power to dispose
of Xwhen the credit is paid off, and as long as I don't
violate any rights of others.
Alter: I surrender my claims about any disposition of X.

Driver:
What help will you give me if this car does not work as expected?Dealer: We pay for any fabrication faults in the car for three years
or 10'000 miles, whichever comes first.

Ego: I have
after-the-purchase claims regarding X.Alter: I give the guarantees G.

Driver: I
don't want to allow you or anyone else to changethese conditions.
Dealer: I shall have no possibility to change the ways you use the car
that I sell to you.

Ego: I am immune from any attempt
by any Alter to change my powers over X.
Alter: I have no power to change Ego's conditions for disposing of
X.

The above illustrates
the hidden background of norms for transferring a conventional property in a
correct way. A market in a modern economy is a continuous exchange of
properties until they end up with the person or organization that is willing to
pay the most. As you see, it is a very intricate process, and there is nothing
self-evident in an exchange in a market economy. It is a complex human
achievement. Please note that what you actually pay for is the title to
the car. With a title come the listed powers to dispose of the property and the
mentioned guarantees and immunities.

Property rights are
held by collectives or individuals. Properties may be peacefully transferred in
other ways than trade: by inheritance, by gifts, and by taxation.

Note that "property
right" is not a unitary concept. The power to dispose in a property right
includes a series of separate functions, i.e. to personally use or consume the
property, lend it to others for pay or for free, use it as a collateral for a
loan, give it away to anyone, sell it, or destroy it. A seller on a market may
restrict the buyer's use of these functions until the property is fully paid.

In any transaction in
a modern market economy it is the money that is central, not the goods.
A change in the car dealer's wealth is correctly measured in the accounting
system by the money he makes on transactions; it is at best only proximate by
the change in his inventory of unsold cars. Speaking strictly, as many
economists nowadays do, a market economy is a continuous exchange of titles
to goods and entitlements to services until they end up in the power of the
highest payer. Price controls by governments, churches, cartels, or mafias do
not belong in a market economy.

The fact that property
rights refer to a series of separate functions means that governments can enter
restrictions on private property by other means than by expropriating it. For
example, it can control the housing market in a city by a series of measures
such as rent control, rationing available apartments, taxes on sales of
apartments and buildings, requirements to let a welfare agency select residents
to prevent discriminations, subsidizing public housing so that construction of
apartments by private investors becomes unprofitable. Thus the economy may be
politically planned.

The free exchange and
enjoyment of property rights is a landmark of capitalism, a free
economy. The draining of property rights is commonly promoted in the European
movement of social democracy (Adler-Karlsson
1969). It lets the owner keep his name on the title of his property but takes
over or restricts some property functions. (In the United States and Canada
this political program, strangely enough, is called "liberalism.") It
is a pattern separate in degree, not in kind, from communism, which lets
the state take over all aspects of property and prohibits all private exercise
of the different property functions. Here the economy is totally politically
planned.

If Dunbar's number is
surpassed in encounters and the members' relations to one another have a low
degree of familiarity, then
(a) actions of the members, particularly speech acts, tend to occur
which are, not only unknown to, but unpredictable by other participants; and
(b) the members' accounts and presentations of themselves and their
situation have low barriers to dishonest editing.

The price system in a
market can collect information in large and complex systems more efficiently
than a centralized bureaucracy can do. This has been the insight and message of
Friedrich Hayek and his students.

Needless to say,
capitalism, social democracy, and communism are not only different economic
systems. They are also political systems that differ fundamentally in their
views on the freedom of citizens, the distribution of individual and household
resources, and the use of revolutionary violence to transform society.

The rational pursuit
of wealth can follow many paths including systematic robbery and organized
extortion. Two more peaceful and rational avenues are the procedures of profit
seeking and rent seeking. Rational profit seeking is the pursuit of long-term
gains through continuous economic exchanges (Weber 1923). Rational rent seeking
is the pursuit of work-free income guaranteed for long periods (Tullock 1989). The former abounds in the market economy and
the latter in the welfare economy.

A nascent social and
economic order in Scotland and England based on profit seeking was codified by
Adam Smith in his work The Wealth of Nations 1776. "The desire to
improve our conditions, a desire that comes to us in the womb and never leaves
us until we go to the grave" was what Smith saw as the source of economic
progress. It gets a chance where "natural freedom" prevails, i.e.
where every individual has the right and capacity — without fear of punishment
from officials, priests, criminals, or Besserwissers
– to do what seems best to him or her in the current situation. Individual
interests are realized in a division of labor where anyone can establish his
shop without restrictions and enjoy free competition with others.

When everyone thus
pursues self-interest, overall wealth and welfare are also promoted. Thus,
society need not be held together by commands and threats from the government,
as had been thought from Plato to Hobbes. In Smith's view, it can cohere
through mutual self-interest. "It is not from the benevolence from the
butcher, the brewer, or the baker that we expect our dinner, but from their
regard to their own interest" is a much quoted insight in The Wealth of
Nations. (We have also already quoted
it.) In our terminology we would say that Smith sees the the
economy, not as an organization, but as a network. It is not a state or a
monopoly that runs – or necessarily grants permissions to others to run –
industry and trade. It is a market of free agents and free exchanges.

The core of the market
economy is profit seeking by means of a continuous exchange of titles to
properties, an exchange that comes to a halt, usually temporary ones, when no
one wants to pay more than the current bid for the right to the goods or services
offered. This point of balance between demand and supply sets a market price.

Adam Smith's recipe
for economic growth is an all-inclusive competitive market with increased
division of labor. It leads to an increased specialization of firms, making
them large and efficient. Here he made the biggest discovery so far in the
social sciences: the division of labor on a market is the cornucopia of
mankind. In a society with division of labor and free trade between different
practitioners all parties benefit. In the end, even the weaker party in an
exchange benefits! This seems so unbelievable that politicians in most
societies have set up structures to stop or control the tapping of this horn of
plenty.

TECHLater
Joseph Schumpeter added technological and organizational innovations
leading to the destruction, transformation and renewal of products and
services, and to mobility and flexibility of the staffs of firms. The Smith
model may best fit the mature industries producing established commodities, and
the Schumpeter model may best fit new emerging product fields.

In the decades up to
the last millennium, the Schumpeterian growth by "creative
destruction" has been somewhat more used in the United States than in
Japan and Europe. In twentieth-century Japan, the corporations were
exceptionally reluctant to destroy or to renew by bankruptcy. They rather
borrowed money from the banks to avoid it, and the banks became stuck with
volumes of "non-performing" business loans. In Europe — particularly
in France with its heritage of mercantilism and in Germany with its heritage of
corporative hegemony — it has been common to counter creative destruction in
the economy with various public systems of subsidies or other protections to
industries and agriculture in decline. There are, for example, unemployment
benefits that do not require the recipient to abandon his or her more or less
obsolete occupation for a career in a new field or a new place.

Weber’s
twentieth-century version of the market economy is "rational
capitalism" (Weber 1923). It consists of firms (i.e. organizations)
that operate as units in markets with many buyers and sellers, and themselves are traded on a stock market. Capitalism, he
says, exists when most, not just some, everyday needs
of the population are covered by products and services from such firms. The
factors of production (land, buildings, machinery, technologies, input goods,
inventions, financial capital, raw materials, labor and finished products) are
controlled by entrepreneurs in rational capitalism. The art of entrepreneurship
lies in utilizing one's access to such factors of production, not to satisfy
the personal lust for power, avarice, or private desires, but to gain a lasting
rise in value of the firm.

Rational capitalism
presupposes that all business events are entered in an accounting system in
which data are registered, processed, calculated, and reported to facilitate
business decisions. This enables firms to systematically work to retain or
improve profits (according to the operating statement) for every business
period, and to attain assets that exceed their liabilities (according to the
balance sheet) at the end of each accounting period. Rational capitalism, in
short, is the pursuit of good accounts for a firm.

To pursue good
accounts efficiently, the capitalist management should be free to hire and fire
workers, to divide the work between them, and alone command them in the work
place. To see workers in such machine-like ways obviously creates conflicts
with their lifecycles, and cannot be sustained (see Chapter 30). In his days
Weber dismissed this rather lightly as a conflict between formal and
substantive rationality. Actually, it is a further illustration of Weber's
discovery of the severe conflicts in our everyday life and our institutions
that are caused by Western rationalism.

Profit seeking may be
rational from the point of the total economy but not necessarily from the point
of the individual. To be sure, the market economy produces great wealth. But it
is a “wealth of nations,” not necessarily the wealth of any individual.
It carries no guarantee against a relative individual poverty or misfortune.

The guarantees against
poverty and any drop in riches are found in rent seeking. The workings
of this phenomenon were observed and analyzed by the liberal economist Knut Wicksell in the early decades of the twentieth century. He
called the Swedish pension reform of 1913, “rent hysteria,” a choice of words
indicating that he was opposed to the reform. This very original version of
Social Security payments for old age was delivered in roughly equal amounts by
the state to all elderly Swedes regardless of their needs, whether they
had been employed or not, and regardless of how much they had paid in taxes.

The reform was
originally conceived as a copy of Bismarck's German welfare program for the
first big generation of industrial workers, a generation with a rural
background who no longer had a farm to retire to in old age. The industrial
employers of the period had a routine for paying wages but no routines for
paying pensions. They argued that the state ought to run a pension scheme for
industrial workers as it did for civil servants. The farmers then wanted the
same cash pensions as the factory workers. The universal features of public
welfare in Sweden were thus born by the consensus of joint rent seeking of
workers, employers, and farmers (Zetterberg & Ljungberg,
1997, Chapter 5).

Rent seeking is a
modus vivendi of households. We deal further with this in Chapter 25.

Rent seeking, like
Weber’s case of profit seeking, has individual expressions that have little to
do with the rationality of the total economy. Peggy Hopkins Joyce (1893-1957)
was a gregarious Virginia blond without education and money, married for the
first of many times as a teenager. She acquired an insatiable taste for fine
clothes, diamonds and a glamorous social life. As a hostess or guest she made
most every party a success, and she was a joy in bed. She helped many
millionaires separate from their money. She was the model for Gentlemen
Prefer Blondes and the hit song Diamonds are a Girl’s Best Friend.
The gossip columns of the popular press of the 1920s tabbed her
”gold digger.”

Rational economic
welfare has nothing to do with such individual rent seeking.

The economy, more than
other realms, can reward its participants with its own product. Those who make
money for a firm are rewarded by money, not medals, statues, or publicity.

The Makers of riches,
the entrepreneurs, depart from the simple rule that in the economy you are
simply rewarded by money. This has made them mysterious to most politicians and
academics, even to academic economists. A first key to the understanding of
entrepreneurs is the fact that the economic reward system in most countries
allows an entrepreneur to attach his name to his enterprise. Local streets
display stores and workshops with names of the owners in highly visible signs.
And in the streets of the economic capitals you can see corporate headquarters
with the family names of the founders, e.g., the Rothschild Bank, the Ford
Motor Company, the Krupp Works, E. I. du Pont de Nemours and Company. In the use
of such nomenclature, the rewards in the economy are similar to those in art
and science where your name or signature also may be attached to your
achievement. Their sense of achievement and its visible aspects are important
to them. For many, good yearly accounts for their firms means as much (or more)
as the amount in their personal bank accounts.

Although numerical
scores are available for the economic stratification of riches, the economic
reward system contains other units, more visible ones to the public than the
bank accounts. The signs of economic position and success that are honored by
the larger community in a capitalist economy are based on slacker scales.
As Veblen (1899) had elaborated, they may consist of conspicuous goods and
services, number of residences (rated as to size and location), number of
servants and/or labor-saving devices in the household, annual charity
contributions, and so on. Generally speaking, a person's wealth was proven to
outsiders by his or her conspicuous consumption.

The reward pattern in
the economy is solidified by a series of auxiliary social prescriptions; for
example, if a rich man does not show a normal amount of the display of wealth
and its obligations he may be denounced as a miser. If a visitor to the successful
does not choose to notice or appreciate displayed goods and services in the
rich man's home, he may be seen as ungrateful.

In many instances
there is a certain self-generation — success by virtue of success — in the
reward system of the economic realm, the so called Matthew effect. For example,
the economically successful individual may become a creditor and investor,
receiving additional income in the form of interest or dividends and perhaps
homage from those who may want to borrow money from him.

Also with monetary
rewards added, the non-economic realms retain their systems of honor and
respect. At the turn of the century, members of the non-economic elites are
usually addressed with their title as Doctor, Judge, Warden, MP, Reverend, et
cetera. In business you are simply Mr. or Ms. and your formal reward is money
and money alone.

Tokens to stabilize
economic evaluations were invented to facilitate an exchange of properties.
Coins from about 6000 BC, stamped with a lion, have been found in Lydia, the
present western Turkey. Coins are standardized pieces of a precious metal that
trade at the value of that metal. When in olden times, household were no longer
self-sufficient, they first traded for their wants in kind: exchanging cattle
for cooking utensils, brides, or whatever that could be used in barters. There
was an obvious advantage to using coins in such exchanges, and coins became
essential to households.

With coinage, most
everything — tools, produce, cattle, and slaves — could begin to receive
generally known prices. Augustus put his picture, retouched to be a symbol of
benevolent power, on Roman coins. This practice was how a sovereign power
guaranteed to the users the weight and purity of coins. However, subsequent Roman
emperors replaced increasing parts of the base metal in the coins with cheaper
metals, thus "debasing" the currency, causing a general increase in
prices, i.e. inflation in which too many tokens chased available products and
services.

Inflation also
occurred when the supply of gold increased. There was a scarcity of money in
much of 14th and early 15th century Europe, driven by a decline in gold and
silver production and a chronic deficit in European trade with the Levant. The
Spaniards of the era who conquered and colonized South America had one
overriding mission: to bring home gold. The scarcity reversed into its
opposite. Gold and gold coins flooded Spain and Europe. This was a largely
illusory wealth due to the resulting inflation. In hindsight, this could
probably have been avoided if the golden capital had been invested in
productive pursuits in agriculture and manufacturing instead of in glamorous
lifestyles as favored by the Spaniards. But the idea of productive investments
was beyond the horizon of the economists of the day. They advised the kings
that gold should be hoarded in state coffers. This mercantilism is not the only
false theory that economists have brought to the world.

In the Middle Ages, Venice came to function as the principal
bullion market for all Europe and the Mediterranean. Zecca,
the mint of Venice, produced in successive periods the Penny, the Grosso, the Ducat, and the Soldino.

Paper instruments as
tokens for coins of precious metals first developed in Venice and Genoa to
finance loans to the state. Eventually foreign states, not just royal
personalities and households, could become borrowers. Loans to states could be
guaranteed by promising the lender a share of some tax. Special banks emerged
to provide these loans and other banks came into being to manage these public
debts; the latter we now call central banks.

For merchants,
temporary tokens of coins in the from
of financial instruments on paper also developed in Genoa and Venice. It could
begin with something as simple as the arrival of German merchants to the Venice
bullion market with unminted gold from their mines.
They got negotiable receipts — we would call them bills or checks — from the Zecca. While waiting for the coins to be delivered they
could, if necessary, use these receipts for their expenses and purchases in the
city. In 1528, the mint in Venice broadened its assistance to private
individuals and firms and began to pay market rates of interest on specie
deposits, the so-called depositi in Zecca, a service to manage private capital.

Venice and Genoa
succumbed in political strife and wars. The rest of the development of modern
finance is located in Amsterdam, London, Philadelphia, and New York. For
governments, raising money via bond markets became a form of deferred taxation
to finance wars and infrastructures. For example, the young state of
Pennsylvania raised money on the Amsterdam bourse to build canals. States need
money most when they go to war. Wars have accelerated the buildup of the system
for handling national debts.

In February 1797 war
loomed between England and France. A frigate from the French fleet off Ireland
landed a small number of soldiers at Fishguard in Pembrokeshire. The incident is often called "the last
invasion of Britain." The alarming news travelled throughout the country.
People wanted the safety of silver and gold coins hands-on, and not only as a
promise on paper bank notes that, on demand, they could be exchanged for coins.
An impulsive run on the country's banks occurred.

The reserves in the
country banks and of the Bank of England quickly run down. Bank of England
asked and got permission to suspend cash payments with coins. After February
26, the Bank would exchange only paper for paper. Paper notes of less than £5
in value, which previously had been prohibited was now printed en masse. The
promise to pay in coins was replaced by a promise, or rather an unproven
assertion, that the new notes were worth £1 and £2 and could be used as tender
just as the old coins. This kind of monetary instrument is nowadays called
"fiat money" in technical vocabulary.

To the surprise of the
British bankers, the new money was accepted by the public and by merchants
without any serious protests. Paper money in small denominations, not backed by
real precious metals, functioned in the markets! Not until 1821 was the
exchange to silver and gold coins reintroduced. However, the habit of
suspending gold standards at times of war continued. A suspension was also a
common prerequisite for other big expenses such as taxing the economies of the
Twentieth Century for the creation of state-run welfare, rather than using
communitarian or market-based welfare measures. On balance, however, the gold
standard meant that national economic realms were immune from large-scale
political manipulations of the money supply, an essential requirement of a
many-splendored society whose societal realms cherish their independence.

The growth of wealth
in the 19th and 20th centuries is the greatest story never told in full to the
rank and file of mankind. They hear more about relative poverty than about
absolute wealth. The expansion of wealth was not matched by an expansion of the
production of gold. An increased role for paper money was inevitable. Country
after country left the gold standard. The United States kept the gold standard
into the 1970s. With the US still on the gold standard it became self-evident
for governments to have US dollars in their treasuries. The triggering event
for Washington to leave the gold standard was a debt of about 3 billion dollars
to France that had helped the financing of the Vietnam War. In August 1971 the
US government received a request that this loan be repaid in gold. Afraid that
other nations would follow the French example, The
Treasury did not see fit to dispense with so much gold from Fort Knox at that
point in time. President Nixon immediately took the country off the gold
standard.

The United States
remained, however, the biggest and most stable economy in the world. Its market
for Treasury bills was larger and more liquid than the markets of other
government securities, including Bunds in Frankfurt and Guilds in London. The
United States Treasury continued to serve as the world's mattress in troubled
times. With this in flow of borrowed money, the country could develop a
dependency on imported oil, conduct limited but expensive wars, and develop
affordable houses to less moneyed households, all without raising
taxes. In the first decade of the twenty-first century, the latter
involved a selling of toxic derivative securities by government chartered
mortgage corporations to banks and money managers not only in the United States
but in Europe and Asia and to other takers. This swindle contributed to a world-wide
economic depression. It added a very concrete grievance to the anti-Americanism
in the world that otherwise was mostly sour grapes and defensive
bilge.

TECHThe
fiat money took new shapes in credit cards ("plastic money,") and in
electronically controlled accounts ("digital money"). The central
banks learned to add (or subtract) to the total money supply by pressing the
keys of a computer connected to the banking system; no need to start printing
presses. In increasing numbers ordinary consumers also learned to press their
computer keys, link up with their bank accounts via Internet, and do their
transactions electronically.

With fiat money there
is no limit to the money supply. But there is nevertheless a firm limit to the
amount in circulation that has the value of money, money that keeps its value
over time and space.

All modern nations
have developed a "square of power," to
use a wording from Ferguson (2001). First, there is a tax-gathering
bureaucracy, i.e. organized procurers with legal backing who claim money for
use by the body politic. If necessary they use force to collect the taxes and they fine or imprison those who balk. (We will deal in
more detail with taxation in Chapter 22 on the body politic.) Second, nations
have parliamentary institutions, in the beginning not necessary based on
universal franchise, that authorize taxation and also specify the state's use
of the money. Consent of the governed, as represented by members of parliament,
is a prerequisite for smooth tax collection. Third, there is a system of
national debt, that is, in effect a system for delayed taxation. It has been
essential to develop and maintain trust that these debts will be repaid. The
state of Venice honored all its debts, but delayed payments did occur. Fourth,
a central bank is needed to manage this debt. This bank is an agency of the
state or of the parliament as in Sweden which has the world's oldest central
bank.

Nowadays the advanced
central banks have charters that stress their independence. They are not
obliged to take all instructions from the governments of the day. The latter
often face the temptation to debase the currency, to "print money" as
the saying goes, to get funds for their political programs. Incumbent governments
in democracies usually wish low interest rates in election years to please the
electorate and thus get enough votes for reelection. Such practices are made
more difficult by charters of independence, provided the central bankers know
that their job is to be unpopular.

A somewhat covert
version of "printing money" in volume is to issue government bonds
that have no other buyer than the country's own central bank. When the
venerable Bank of England increased the money supply this way in March 2009
they did not call it printing money but "quantitative easing," words
with a Saussarian meaning as good as any.

An
industrial revolution is a large-scale combination of a new technology with new
social arrangements. Starting in the late eighteenth century and culminating in
the nineteenth one, Europe’s first industrial revolution used the technology of
the steam engine and the social organization of the factory. It gave us
transport by rail and steamers.

A
second industrial revolution began at the end of the nineteenth century and
culminating in the twentieth one when combustion engines and electric engines
reshaped the factories. The combustion and jet engines later opened for
transportation by trucks and cars and eventually airplanes. With electric start
motors automobiles could readily be used without a chauffeur's cranking the
motor to a start. A mass market opened that included both men and women.
Electric devices reshaped not only factory work but also offices and households
and everyday living.

After
World War II it was thought that the next technological revolution would be
called "the atomic age." It was heralded by a big monument in
Brussels. One kilogram coal produces energy amounting to 3kWh while one kilo
uranium gives 50 000 kWh, that is 16 700 times as much. But the technology to
harness this huge energy did not integrate well with existing technologies. Atomic
energy did not lead to a new industrial revolution, at least not in its first
60 years.

Instead,
the third micro-electronic industrial revolution began at the end of the
twentieth century with the digitalization of all kinds of communication, print,
music, pictures. Products and packages receive identities in bar codes and
animals receive digital identities in chips; anything living can get a record
of its unique variation from the DNA of the species. Most importantly, this
revolution, unlike the previous two, gets at the core of civilized living, the
use of communication by symbols.

The
shifts in technologies in the three industrial revolutions have produced much
wealth. This cannot be summarized in any smooth macro-economic law of
equilibrium. In the spirit of Joseph Schumpeter (1942) we must rather focus on
the role of entrepreneurs who take hold of the new and destroy the old. The
entry of entrepreneurs with new technology is the force that has sustained
long-term economic growth. In the first version of his theory, the creative
roles of personal efforts by entrepreneurs were seen as critical. Later
Schumpeter gave more credit to departments of research and development in big
companies and to their innovative marketing departments.

The
"creative destruction" that entrepreneurs may cause can be quite
dramatic, particularly when the old technology has been in the hands of
efficient companies that have acquired a degree of monopoly in the market.
Labor unions usually favor the old technology since transformations includes
closing factories and unemployment. Strikes, at times with violence, easily
became the order of many days during a change-over. The more sophisticated
labor economists in Sweden, Rudolf Meidner and GöstaRehn, took an opposite view
and proposed more civilized measures. To achieve as high wages for workers as
possible the labor movement should not accommodate to the factories of old
technologies but rather maintain a high wage pressure there. This so-called
"Swedish wage model" is worth a moment of consideration.

In
1951 a book by the German-born economist Rudolf Meidner
entitled Fackföreningsrörelsenoch den fullasysselsättningen
("The Labor Movement and Full Employment") was presented to a Swedish
labor congress. Its core principle is that all jobs, regardless of their line
of work, that are the same shall have the same pay in all firms at all places
of work throughout the country. This departure from market wages Meidner called "a wage policy of solidarity."
Thus differences in wages would minimize between large and small, rich and poor
employers, between city and country, between young and old employees, and, what
was later emphasized much more than in 1951, between men and women. The less
profitable firms would pay the same wages as more profitable ones. This would
force out of business firms with old technologies along with those operating in
declining markets, as well as firms with inappropriate organization, and/or
weak leadership. Workers would then be free, particularly in good times, to
move to the more profitable enterprises with new technology and modern
organization and leadership of production and capacity to pay high wages.

This
policy would maintain a high level of wages in a country, a central union goal.
It required generous unemployment compensations between jobs and an active
public policy of helping and training people to take new jobs, subsidizing if
need be their moves to other towns where they could get jobs in new or
expanding firms able to pay good wages. Around these ideas economists from the
blue-collar and white-collar unions and the central patronage association could
unite. The complaints from firms with marginal profit levels were not heeded.
Complaints arose also among some unions (e.g. the miners) that the very rich
firms did not have to pay higher wages than others. They were loud at times and
often underlined by communists, but on balance the system was accepted. Sweden
could embark on long-term big structural and technological changes without as
much labor strife as in most other European countries.

A
by-product of the model was that the government of Sweden, unlike its
colleagues on the European continent, could stay out of wage negotiation in the
private sector, a feat cheered by us who believe in a the aspect of the
many-splendored society to keep societal realms out one another' hair. This was
a silver lining in a society that otherwise suffers from a severe hegemony by
the body politic over all other societal realms. Over time technologies and
industrial organization became more complex, and the Swedes found it more
difficult to tell which jobs were "the same" and thus deserving the
same wage. Some locally set individual variations in wages became accepted, but
the rules on seniority, working hours, vacations, pensions, and working
environment could remain common throughout the entire county.

The
silver lining was removed by a prime minister named Olof
Palme. In a period with poor standing in the electorate for his social
democratic government and a tight budget that did not allow the usual
additional welfare measures, he decided to throw the power of the state behind
the unions. They received more favorable rules about hiring and firing and about
industrial conflicts, rules that they could not have achieved by negotiations
with the employers. This legislation cost the government nothing in the budget.
It damaged, beyond repair for decades, a memorable, splendored feature of
Swedish society, a fair and rational labor market without government dictates.

A
new major technology such as the steam, combustion, or electrical engines in
the past or microprocessors in the present does not automatically produce high
economic growth. Nor is competition enough to move it into dominance, as
classical economics would have it. A new technology wins its economic successes
by combining, not competing, with complementary technologies into a growing
manufacturing cluster. In order to take off, the auto industry needed not only
combustion technology but steel mills and its complementary technique of
buckling metal sheets. To develop a comfortable product it had to use rubber
and the know-how of blowing air into tires. To make the process of starting a
car easier for the consumer a start engine had to be added from electric
technology and a battery from chemical technology. The new technology of
covering roads by asphalt rather than stones or gravel came in handy. Thus, for
the automobile, entrepreneurs could piece together "a development
block" (a term coined by Erik Dahmén 1950) that
included also services from investors. Such blocks often form a geographic
concentration such as the first auto industry block in Michigan/Ohio.

The
typical forms of social organization in a development block
is that of what we have called "netorgs."
Competition and cooperation take place in networks of organizations. The
success of development blocks is thus predictable from our Proposition in
Chapter 7 on The Netorg System of Realm Expansion.

7:7. "The Netorg
System of Realm Expansion"

A
cardinal value grows and its societal realm extends its reach
(a) when networks dominate over organizations in the realm, and
(b) primarily when networking organizations dominate.

When
a major new technology such as the microchips is born there is much excitement.
At the end of the Twentieth century there was no end to the great aspirations
that came with the arrival of the network technology of the Internet. (See John Perry Barlow's declaration cited in
Chapter 5.) Silicon Valley, the foremost development block around the new
technology, attracted overinvestment. But the potential of a new technology
cannot be put to full use until the complementary contributions from
established technologies have been developed. An IT boom and bust occurred at
the turn of the century before the new technology had found its huge number of
applications though complementary technologies ranging from sorting both
packages and bank transactions to recording and distributing both music and
mail. It is in this later and more mature phase the new technology makes its
biggest contribution to economic growth. For historians and theorists of
business cycles it may be more useful to pay more attention to the cycle of
development blocks than to the first breakthrough of a new technology.

In
a market economy, new technologies do not come about by political decisions. No
parliament decides to introduce automobiles or the personal computer in a
country. But politicians may oppose new technologies. After the nuclear
catastrophe in Chernobyl, the Swedish Social Democratic government introduced a
law prohibiting, not only planning for new nuclear energy, but any research
into the application of nuclear energy. This was an infringement on the
autonomy of science. The universities reduced or closed their nuclear laboratories
and training programs. The country's nuclear industry, one of the few in
Europe, was sold to Westinghouse in the United States. The nuclear energy
plants, however, were to run their technological life, perhaps some 40 years.
To recruit top engineers under these conditions was difficult. Far from
promoting safety, there are reasons to believe that safety standards and
maintenance deteriorated due to the clumsy political meddling with the autonomy
of the realm of science. More often than not democratic politicians restrain
rather than prohibit technologies. It is telling that at the millennium more of
the new production details in a car were due to government regulations than to
new technology. In the opinion climate at the time of this writing it is
particularly common among politicians to restrain technology in the name of
reducing global warming. The latter is perceived as a doomsday threat and a
good opportunity to do what politicians are good at: to tax and to regulate.

The
track record of big government to pick new technologies for public investments
suffers from the unfamiliarity of politicians with both entrepreneurs and
development blocks. To prevent misplacements of investment capital, politicians
with business ambitions must realize that the economy is a different world from
politics and administration and has rules and conditions of its own.
Politicians must rely on middlemen, Providers and Procurers, who can see these
rules and conditions without partisan spectacles or realm biases. This is a
hard task for politicians who have been used to recommending lucrative
consulting jobs or assignments to cronies.

The
significance of development blocks is often omitted in the study of economics.
This may explain why non-economists such as investors in new technology compete
well with professional economists. The mixed track record of big banks in
choosing investments in new technologies is also due to a nearly universal lack
of understanding by Keepers (bankers) of the importance of Creators (entrepreneurs).
The small European entrepreneurs with new technologies have often a better
chance of borrowing money from one another than from banks. The United States
has a better system for the supply of venture capital.

In
several advanced countries manufacturing and the sale of manufactured goods is
no longer the main highway to wealth. Purely financial transactions dominate
the international flow of money; payments for imported manufactured goods and
commodities come in a poor second.

Finance
as a source of riches is the process of making money by means of money. It
includes traditional organizations such as banks and insurance companies. A
modern bank is much more than an institution that takes in, i.e. borrows,
savings from the public at low rates of interest an lends it to others at
higher rates. Transactions other than this "interest gap" usually
account for the lion's share of modern bank profits. Using the labels in Figure
20.2 we may say that bankers are no longer mere Keepers of money and risk-averse
advisors. They act as Brokers for numerous financial services and are hard-hitting,
risk-seeking traders. Likewise, a modern insurance company is more than an
insurer of households, factories, and ships. Most anything can be insured,
including your health, bank account, and the bonds that depend on mortgage
payments. International networks of reinsurers spread the risks. The new
financiers are true Makers, i.e., creators, innovators, and entrepreneurs in
wealth, making money by money. They not only trade for their institution's
account on financial markets. They have invented new types of monetary assets,
not all of them sound ones.

In
the first decade of the new millennium in the United States, financial services
grew to represent more than 20 percent of the gross domestic product, compared
with 13 percent for manufacturing. Before the crash in 2008, bundles of
consumer loans and home mortgages packaged as securities were the biggest U.S.
export business. Between 2001 and 2007 a total of $27 trillion of these
securities were exported, i.e. sold to financial institutions in Europe, Asia,
Australia, and Africa. Practically all were stamped "investment
grade" by rating agencies, and the salesmen probably hinted that this
meant that they were "good as gold." To buy them back would have
required all of the gross national product of the United States during two
years. (Virtually all early issues were redeemed in good order.) When the cash
value of these securities became uncertain, the many banks and other financial
institutions on all continents that had bought them suddenly became suspected
of approaching insolvency; each one knew their own situation and suspected that
neighboring ones had the same or worse problem.

In
the new ballpark of finance, bankers and insurers are a minority. In the
majority are the managers of pension funds, private investment funds,
endowments, and charities. Here are also special companies that handle
mortgages that borrow money at low rate of interest, provide mortgages for
households and firms at higher rates of interest, package these mortgages as
bonds for resale, and use the proceeds for further mortgages. Here are stock
exchanges, currency traders, and bond dealers. Here are the credit card
companies. Hedge funds can deal in anything expressed in money, and so does the
whole world of finance. The successes of these financial
services haslead to the customary circle of
capitalism: over-establishment in good times followed by bankruptcies in bad
times.

The
new world of finance has also celebrated a bridgehead to conquer the old world
of manufacturing goods and producing services. It is called "private
equity." With its risk prone capital private equity buys industries,
restructures them, improves their efficiency so that they can be sold off
within ten or so years. This process may involve paying out parts of the
working capital of the acquired firms (that admittedly have often been sleepy)
to the new owners. It is replaced with loans from the market. This gives
private equity more working capital for new forays of acquisitions. The
management of the acquired company gets a new but acceptable pressure to
perform better, so that that the interests on its now borrowed capital can be
paid.

Any
combination of economic values, for example mortgages, can be combined and
packed as a "derivative" and sold as a bond. There is nothing
intrinsically sinister in this; it is a rational device to spread risks,
particularly in areas where some mortgages have been issued to persons with
poor credit rating. The initial package may travel as collateral and/or sales
object between different financial firms to end up in an investment bank. The
investment bank raises its money for this purchase by selling certificates of
derivatives to ordinary banks with offices on Main Street in any country in the
world. They can offer these at various rate of interest depending of the level
of risk. For banks to accept them as part of their capital base, the
certificates must be stamped, not like Roman coins by the image of an Emperor,
but by a rating agency such as Moody's or Standard and Poor as
"investment grade," popularly interpreted as "good as
gold." An insurance company may furthermore insure the bonds against
default. Now the risks have really been spread on many hands. Many hands have
also a claim on a part of the income from the original mortgage.

But
the transparency of the first generation of these financial assets has been
much reduced when it changed hands to new generations of owners. The risk of
defaults at the first stage of this chain was poorly understood. When salesmen
from American investment banks turned up to place a certificate in a regional
or foreign bank, neither they nor the buyer seem fully aware of all the intricacies
in the history and buildup of the investment product that is to be added to the
capital of the buying bank. Needless to say the salesmen, like everyone else in
this chain, were rewarded by high bonuses. Some packing and certifying actions
of the first generation of derivatives may well belong in the right hand part
of the semiotic square of wealth, that is, among swindles.

The
market in the United States for derivatives, particularly those involving
mortgages, grew significantly in the new century. The commitments involved in
the loan transaction of all in-between instances in these chains also grew in
numbers. The title documents of these financial assets abound with Saussarian
symbols, garlands of words referring to one another rather than to something
concrete. Moreover, derivatives transactions were struck privately. The market
was unregulated, with no central exchange where prices and volumes were
disclosed. This chaotic situation with financial instruments of poor
transparency was one of the hall marks of the worldwide financial crisis of
2008. More on this crisis later.

Creative
financial processes can be used, not only to capitalist ends but also to
socialist ends. Social Democracy has learned to use a high taxation of what
belongs to the owners on the balance sheets of firms, and give borrowed capital
in firms breaks, for example in the form of a full tax deduction of
interests. It may add the use high individual or household wealth taxes to
further reduce private capital, making firms dependent on sovereign funds (run
by states) or wage-earner funds (run by labor unions). When such measures are
combined with mandatory representation by governments and unions on corporate
boards, "capitalism without capitalists" is close at hand — without
having to resort to much old-style nationalization. At the pinnacle of their
power, Sweden's Social Democrats tried to accomplish this. They were met with
local resistance and an opinion climate influenced by Margaret Thatcher and
Ronald Reagan. In a Europeanized and globalized environment their policies for
the economy were not strikingly forward-looking. Much private capital and a
couple of the most successful big firms escaped the socialist designs by moving
abroad.

Many
exchanges in a market involve delays between production and delivery. This
causes booms and busts. A classic example is the so called "hog
cycle." Farmers who produce pork must make production decisions before
they know what price they will get on the market. About 10 months elapses
between breeding a sow and the slaughter of her offspring. Since a hog breeder
may not know the decisions made by other producers, cumulative overreactions to
very good times as well as very bad times have resulted in a cyclical pattern
of production and prices. Agricultural economists show that the full cycle of
the pork market takes four years:

·First
year: In this good year prices are above production costs and the farmers increase
production. Keeping more gilts on the farm for
breeding brings less pork to the market. Prices go even higher.

·Second
year: The increased pork brought to the market from the now larger herd of sows
brings prices to a fall.

·Third
year: Oversupply in the market is now apparent; prices fall below all costs of
production. Many producers decide to reduce their herds. Fewer gilts are retained and more sows are sold, which causes an
increased amount of pork to go to the market for even lower prices.

·Fourth
year: Production declines and prices increase to the break-even point or
better. A new cycle can start.

This kind of
boom and bust for agricultural products is used as justification for the price
control that is practiced in some farming countries. We find similar cycles in
the markets for all kinds of fashionable goods and for all economic asset
classes. Typical booms and busts mark the housing market. Again a root problem
is that the builder of a housing project has his costs long before he knows the
selling prices of the finished buildings. Also the customers in the housing
market easily get trapped in the idea the prices of today are not the prices of
tomorrow.

The
fact that firms operating on markets also put themselves on a market is an
ultimate crown of the market economy. The stock market takes funds from owners
of capital who do not immediately have use for the money and puts it into firms
that lack the cash to realize their production ideas. The business plans,
conditions and market prospects carry different levels of risks for different
firms. By spreading the stocks between firms listed on the stock markets the
investor tries to achieve the risk he is willing to bear. In all, allocation of
capital available for investments comes into the hands of those the firms
believed to have the best chances of success.

By
means of the stock market, capital is allotted by decisions inside the societal
realm of the economy, and no decisions by tribal chiefs, priests, moralists,
politicians, or military strongmen are needed. Without a stock market the realm
of the economy would not be independent of other societal realms. A politically
planned economy would be the nearest available alternative. A stock market is
thus one of the several cornerstones of a liberal and many-splendored society.

At
the same time, stock markets expose all listed firms to the booms and busts
that are inherited in markets. A bust affects not only investors but employees,
distributors, and customers of these firms and, in severe cases, the effects
may spread to the general public.

A
first scientific understanding of the nature of the flow of communication on a
stock market was provided by Vilfredo Pareto, a
brilliant Italian social scientist who had started out as a political economist
and who contributed a great deal to economic theory.
He found economics to be too limited a field to help in understanding certain
“irrational” problems, among them, those that appeared in politics. In order to
be rational about the irrational, he turned to sociology. He used sociology to
construct typologies
and theories about the spirit of the times. He used them also in
interpreting movements of the stock market. In a paper from 1901 he wrote about
the importance of the climate of opinion on the Stock Exchange.

Whereas during
the upward trend every argument advanced in order to demonstrate that an
enterprise will produce money is received with favor, the same arguments will
be absolutely rejected during the downward trend... A man who during the
downward trend refuses to buy certain stocks believes himself to be guided
exclusively by reason and does not know that, unconsciously, he yields to the thousand of small impressions which he receives to some
degree from the daily economic news. When, later, during the upward trend, he
will buy those same stocks, or similar shares offering no reasonably better
chance of success, he will again think that he is allowing only the dictates of
reason, and will remain unaware of the fact that his transition from distrust
to trust depends on sentiments generated by the atmosphere around him (Pareto
1901/19??, pp. 93-94).

(a) Persons have an inclination to express
communications that harmonize with customary and/or habitual communications
found in their encounters; and
(b) this tendency increases when others in these encounters have favorable
public views of them.

As
Pareto had noticed, a consensus on the trend emerges rather quickly. Let us
begin our study at a point when this happens during an upward trend. We will
pursue the likely course of events by drawing upon our knowledge from the
reasoning on the edifice of symbols (Book 2) and
about motivations fuelled by symbols (Book 3)
to understand a full cycle of stock market swings. Let’s pursue this in some
detail; it will tell the extent to which social science can explain the course
of stock market swings. Probably the same processes will account for bubbles
also in other markets.

In any social
encounters, the participants
(a) scan each other for the descriptive language in use, particularly
utterances that present opportunities or threats for them;
(b) scan others for the evaluative language in use, particularly
opinions about people such as themselves; and
(c) scan others for the prescriptive language in use, particularly for
any norms that may apply to themselves.

In
meeting face-to-face associates and in absorbing the mass media we know from
the Proposition on Selective
Scanning that people do not observe everything, but tend to focus, among
other things, on the evaluative language in use. In an encounter involving a
market this would usually be the price.

Furthermore,
the Rules of Emotive
and Rational Choice tells us that emotively charged symbols are observed
first; in this case it may well be the number that reveals how rich you are,
i.e. the current market value of your assets.

(a) In scanning a symbolic environment or part thereof man
first reacts to the symbols, if any, that have emotive charges and then to
the executive symbols.
(b) In this reaction, negative emotive symbols have greater effect than
positive emotive symbols.
(c) If all symbols are roughly equally executive,
i.e. emotive meanings are spread evenly or are absent, man exercises rational
choice.

The
rest of the available information is more or less ignored. A period of
continuous upward pricing of an asset sets the focus on the daily scanned price
at the expense of other information about the asset.

The
combined effect of the two cited propositions is that the traders begin to
ignore shifts in the underlying realties and follow only the rising price. This
is now unrestrained and is bid higher and higher. The volume of trade in the
asset increases. Preoccupation in a rising market with the rising price at the
expense of anything else is a defining mark of a so called "bubble."

a) People have a tendency to develop "looking-glass
selves," i.e. self-images that are synonymous or consonant with public
views about them in their social encounters, particularly their encounters
with significant others.
(b) By using language they then modify these self-images in varying degrees
to become their "edited selves," which normally are further
adjusted by physical, biological, or social realities to become their
"authentic selves."

Continuous
increases in the value of an asset boast the evaluation and rank of the owner
in his social encounters. This adds to his self-evaluation. His personality
begins to change. He “re-edits himself” to something grander according to the Proposition on Development
of Selves.

For
little effort and a small initial commitment of money the investor reaps big
rewards. The Proposition on Emotive Sense of Justice
gives the investor a sense of exuberance. At this point asset owners tend to
spend more on personal and family consumption.

14:1."The Emotive Sense of
Justice"

If the evaluations a person receives for a set of actions
in encounters become (a) disproportionately smaller than his commitment to
these action, then he tends to show negative emotive reactions, while (b) if
they become disproportionately larger than the extent of his commitment to
these actions, he trends to show positive emotive reactions.

The
process in the Proposition on Rank Equilibration
in Status-sets begins to work to equalize their ranks of investor and
consumer, making the level of consumption more commensurate with the level of
the brokerage account. Thus we get extravagance in spending during the rise of
the bubble. If we deal with a large bubble this increase in consumption shows
up in the statistics for the total economy and spills over into a period of
“good times,” celebrated by most everybody.

Persons with a status-set of different ranks tend to act
to equalize them (a) so that they match their previously achieved customary
evaluation, or, (b) if they live under conditions of achievement motivation
(i.e. ever higher anchorage points and/or more inflated units of evaluation),
to raise their lower ranks to the level of their highest rank.

Here
begins a critical phase of the boom and bust process that everyone – bread
earners, businessmen, preachers, social workers, and journalists – should worry
about. Politicians in particular ought to worry. But this is the time when
they, like everyone else, are apt to think that markets take care of
themselves. They share in the exuberance, as suggested by the Socially Rewarded
Convergence mentioned above. Everybody’s laments and worries, surely real
enough, come when the bubble has burst.

When
prices of the bubbling asset reflect evermore the expectation of future gains
in prices the equilibrium component in Gary Becker's often cited definition of
economics — “the combined assumptions of maximizing behavior, market
equilibrium, and stable preferences, used relentlessly and unflinchingly, form
the heart of the economic approach” — breaks down. Prices in financial markets
no longer reflect the supply and demand in the way they were supposed to do.

Bubbles
come and go. As a bubble grows, many investors are apt to say “it is different
this time.” A good rule of thumb is to be skeptical of any such talk. During
the IT-bubble in the 1990s the financial world was full of talk about "a
new economy." It had new indices of success, for example "burn
rate," the estimated number of month before new capitalization is needed.
To the IT-enthusiasts in the stock market, burn rate became more of a buy
signal for a company stock than profit.

The longer a continuous string of the very same stimulations
occurs in an encounter, the less effective the latter become, and vice versa,
the longer a string of continuously novel stimulations, the more the
effective they are.

The
Proposition on Satiation indicates
that swings that reverse opinion during a trend are an ever present
possibility. They become a certainty when the talk of a trend no longer
continues the string of positive novelties. Then someone with knowledge pays
attention and discovers that market has taken the wrong way.

Only
a trained participant in the market may notice the early shift in the flow of
information. “This is the first ripple on the waves in many years that shows that the wind with good news from the Exchange is changing
course.” This was Bernard Baruch’s comment on an annual report that mentioned a
slight downturn from the otherwise high profit level maintained by a
technological darling of those days, the Radio Corporation of America. (Cited
from Galbraith 1964, p. ??). It was the new year of
1929, a splendid time for Wall Street where Baruch worked. He sold his shares,
and thereby secured a permanent fortune of 10 million dollars. Thereafter, he
became a legendary participant in discussions on New York’s park benches and an
advisor to several presidents. The crash in 1929 of the overpriced Exchange on
Wall Street came when even other news began to be viewed with pessimism. “Such
thoughts roused first dozens, then hundreds, and finally thousands of breasts…
and at last stopped the upward trend,” says Galbraith.

During
a rising bubble people increasingly borrow money to invest in the uptick. After
a period of such increasingly leveraged speculation in a widespread bubble,
bank credits tend to become tighter. The shortage of new credits affects also
branches other than the bubbling ones. When a big bubble in this way has
infected the financial system, a general decline, an economic recession, is
close at hand.

The
bursting of a market bubble leads to a downtrend in prices that is usually
steeper than the uptrend that built the bubble. At least in part, the
increased steepness is due to the fact that we pay more attention to negative
news than positive news according to the above cited Rules of Emotive
and Rational Choice. Yet there still are days of upticks in the decline:
Wall Street rose about one day in three or four during the worst months of the
Great Depression of the 1930s, raising hopes of the die-

A sudden relocation of people to anomic ranges of their
scales of evaluation slows or stops the functioning of compelling
vocabularies in the society.

A
rapid decline in from an accustomed high level of assets opens the door to the Threats of Anomie. The price
offered to a seller of the assets pushes some of them into the lower anomic
range (Figure 14.3 repeated here) and they lose their bearings. In this range,
the participants in a market can no longer distinguish reasonable levels of
bids.

In
a pioneering controlled bargaining experiment, only few subjects entered this
stage of "panic or demoralized behavior" and "rapid and complete
concession" (Siegel and Fouraker 1960, p. 82).
One can arrange follow-up experiments when these few sellers start Circular Reactions on a
visible scale.

15:4."Circular Reactions"

When participants in a face-to-face encounter converge
their emotive communications (according to Proposition 15:3a), they enter
into a spiraling process of circular, emotive, converging reactions.

This
would correspond to an economic bust in real life that ends in a
"capitulation" on the exchange when a large crowd throw in their
towels and sell at bottom prices. Only strong and experienced traders can stay
aloof when this happens — and they pick up the bargains.

A
high volume of capitulation trades is usually a mark of the bottom of a cycle.
The process of boom and bust can now start all over. The end result of a cycle
is that money has moved from "the weak to the strong," a common
highway in a free market of assets.

The
market economy, as we often have noted, gives unprecedented wealth to mankind.
But the price is the ever recurrent booms and busts, not easy to cope with for
earthlings who have a bias for the
status quo when they use evaluative language, including the language of
money. Political movements that are critical of the market economy therefore
become endemic in all market economies.

Humans are (a) inclined to act to preserve the customary
evaluations they receive in their symbolic environment, be they high or low,
and (b) they are inclined to act so that they avoid receiving more
unfavorable evaluations than these.

With
downturns come calls for more regulations of the markets from all corners. Needless
to say, democratically elected politicians will respond to this public opinion
with vigor. The public does not understand that market needs more and different
regulations at the top of a boom and less and different regulations at the
bottom of the cycle, nor do most politicians. The late awakenings in bust and
booms of both the public and their politicians and their misguided responses in
the different phases of the cycle may make you question whether democracies
with the current level of economic education should be trusted with the
blessings of a market economy.

Booms
and busts of wealth are thus recurrent phenomena in any economic market. We
have arrived at this conclusion by drawing on general propositions that we have
presented and quoted from previous parts of the presentation of The
Many-Splendored Society. None of these propositions is specific to the
cardinal value of wealth. We might therefore assume that the processes we have
discussed and reprinted in this section have parallels in the non-economic
societal realms, i.e. in academe, art, religion, body politic, and in morality.
A very inclusive assumption is the following Proposition on Swings in Cardinal
Values.

The cardinal values
(knowledge, beauty, wealth, sacredness, order, and morality) are driven to
oscillate in networks of individuals and in networks of organizations.

In
the peasant society one learned farming by growing up on a family farm or in a
farming area. When the peasant society changed into an industrial society the
first jobs available in industry were so simple that they could be learned
after a few weeks or months of practice in the factories. As the demands for
occupational skills grew, manufacturers began to establish trade schools. In
Germany trade schools and their accompanying job apprenticeships became
well-trodden routes to education that have persisted to this day.

In
the 1970s and 1980s many European industries closed down schools they had
operated to secure skilled workers. One reason was a changing labor market that
undermined the implicit guarantee that those who went through these schools
would get a life-time job in the industry that run the school. Public
school obtained a near-monopoly on training for industrial jobs. In some
places, schools that once were called trade schools were upgraded and called gymnasiums
orlycées, the more prestigious old names names for youth schools. The demands for business and
industry schools offering a number of practical subjects is thus met with tax
money at no explicit costs for firms in need of trained employees. In some
instances formal contracts between industries and local schools regulate their
relations.

A
general rule in a many-splendored society is that each societal realm is
responsible for its slice of the school curriculum.

Business
and industry add on the job training for their employees. Many also arrange
formal hours of training with outside teachers that often call themselves
"consultants." The expenses for their fees are tax-deductible for the
firms.

It
is remarkably difficult for school children to understand market economy. An
English child's first meeting with the market may be the day he or she buys a
first chocolate bar at the candy counter. The cocoa comes from Africa and has
traveled hundreds of miles; the sugar comes from Central America, the wrapping
paper from Scandinavia. The freighters were built in the Far East, the trucks
in Europe, but running on diesel from the North Sea and on tires from France.
There is no central planning agency that sees to it that the children get their
candy bar without ordering it in advance. They have encountered a great power
shaping modern times, the world markets, coordinated a bit by the invisible
hand of Adam Smith.

The
cashier in the store does not share the candy freely as do the parents,
brothers and sisters of the same family. She wants to be paid, and so do those
who have produced the chocolate, the sugar, the wrapping paper and the
transports. And hardest of all for the children to understand is that the big
market works and delivers without any parent, boss or politician who decides
everything.

It
is also remarkably difficult for school teachers to understand economics. Most
teachers lack professional training in economics, as do most journalists,
priests, bureaucrats, and politicians. They believe states must act in economic
matters in the same way as households do. But in reality and in economic theory
it ain't necessarily so.

If
capitalism ever is removed from the surface of this earth it is not because of
the intellectual superiority of socialism, but because it neglected to train
new generations in its workings. Economic ignoramuses or outright enemies of
the market economy train the great majorities of new generations in the
capitalist world. The business realm has surrendered the teaching of the young
to graduates of state teachers colleges whose political superiors are in
control of the curriculum. These politicians know how to tax, spend, and
regulate, in short, how politics and legislation works. Civics becomes a
priority for the teachers in any state school, not how a market economy works.

The
economy is a great procurer from other societal realms. It looks to the body
politic for legislation about property rights and contracts. It looks to art
for assistance in advertising. It looks to science and particularly to
engineering for product development. It depends heavily on education.

A
high level of education in the working population — which economists usually
call “human capital” — promotes economic growth (Barro
1997) and productivity (Bishop 1991). However, not all kinds of education have
the same effect on the accumulated wealth of a nation. It has often been
asserted that educations in technology or natural science are more beneficial
to a growth in GNP than education in other subjects. But if this were the whole
truth, the Soviet Union with its many engineers would have had one of the
world’s highest GNPs. Markets that function well probably are more important
than the educational level for a nation’s accumulated wealth. A nation’s
educational level also correlates with the development of its productivity. One
might even suggest that there is a connection between the number of hours spent
in doing homework in the school systems of different countries and measurements
of the countries’ growth in productivity.

The
educational level of an individual also has a positive correlation with his
future income level. The rule of thumb is, of course, that the more education
one acquires, the higher the income level. This connection is usually called
the "educational bonus." In developing countries young people are
often anxious to get a higher education to enjoy a bonus in living standard.
This works provided their country has reached a certain level of development
and has introduced a meritocracy that can override promotions by kinship
criteria. If these are not in place the educated easily become revolutionaries
rather than loyal and satisfied citizens.

In
well developed countries the educational bonus is noticeable but not
necessarily great. The 1970s the annual yield after taxes for high education
was c. 12 percent in Sweden. It dropped to 1-3 percent in the early 1980s, then climbed to c. 5 percent in the 1990s. It seems as if
factors other than school education must account for the large variations in
the educational bonus (Lindbäck 1998, pp.47-49,
57-59). In addition to the educational bonus, the extent of piecework wages,
progressive taxation, and the compression of wage differences through
collective bargaining are important explanations to the wage levels.

Tax
money from the economy to the body politic is the largest single transfer in
any modern society. It should raise questions that one societal realm gives up
between one quarter and one half of its cardinal value to another realm. If freedom shall be more than
a philosophical exercise, taxes must be reasonably low — say, no more than a
tenth to a fifth of any income in a household or profit in a firm — so that
everyone can keep enough economic resources to practice freedom. Taxation has
also another side that clashes with freedom; it is enforced by state violence.
Maximum consent of the governed is required in matters of taxation to keep this
violence at a minimum.

Taxation
is best explained by political rather than economic processes, and we will deal
with it in that context (Chapter 22).

Money
is, of course, a necessity in all households that no longer by themselves
produce food, clothing, and shelter. Georg Simmel, in a century-old but
surviving book, Philosophie des Geldes (1907), shows how use of money influences
relations between persons, their way of thinking, their
view of their past, their contemporary life, and their future. Simmel's lasting message is that money is more than an
economic concept; it is a concept for the study of freedom, lifestyles, and
philosophies of life.

What
in Simmel's days were emerging tendencies have in later generations become a decisive fact: the use of
economic rewards for non-economic achievements. Successes in everything from
sports to war bring economic rewards. More or less regular monetary payments
supplement the honorific rewards and positions that go with achievements in
science, art, religion, politics, and humanitarian work. In this way the
cardinal value of the economy seeps, not only into households, but into all
non-economic realms and corners of society.

This
is not an altogether happy development for the societal realm of the economy.
People in the other realms feel that the monetary part of their rewards for
scientific, artistic, religious, political, and civic accomplishments should be
put in line with rewards for business achievements. When this is not possible,
they attack level of salaries, bonuses, pensions, and other parts of the
compensation packages that are normal in business.

Nor
is it a happy state for the non-economic realms. In a planned economy this
means that a very detailed political power rules over all societal realms by
means of price control, political investment decisions, et cetera. In the
market economy it means that market considerations rule also in science, art,
polity, religion and morality. In both cases we have said good bye to a
many-splendored society.

By
the end of Twentieth Century the hegemony of money in some countries resulted
in a 'cancerous economy' that culminated in the financial crisis 2007-2010. The
fact that the societal realm of the economy seeps into a near-dominance of
other realms is a straight illustration of what we call realm hegemony. We call
the hegemony cancerous only when a second element enters: an overwhelming
number of all economic transactions become leveraged, i.e. based on loans, and
become so in an ever higher degree. This happened most drastically in the
United States, but also to a notable extent in Britain and France and some
other rich countries, but much less so in Germany and Japan.

At
the time of the height of banking crisis in 2007-09 U.S. consumer debt — mostly
credit card loans and payday loans — stood at about $2.58 trillion, a threefold
increase in a decade. This reveals that a typical US household did not pay
ordinary living expenses from its current cash but by adding to loans that are
paid back in later installments. It also means that firms, ranging from serious
banks to predatory lenders that are engaged in household finance get a small
cut from most every household purchase in the form of interests and fees. These
firms securitize the money they lend to consumers just as mortgage lenders do.
Any slowdown (or freeze as in 2008) in the market for these securities imperil
the day-to-day cash flow of run-of-the-mill consumers.

The
effects of leverage can be discussed by illustrations from the housing market:

Assume that
there are two buyers to a property, one bids $100 000 of his own money, the
other bids $110 000 of money he has borrowed. The latter, being the highest
bidder, gets the property. There is likelihood in this community, say one or
two in a hundred in good times and five to ten in bad times, that the latter's
loan will default. Normally the ones holding the bag in this case would be the
savers among the public (including the losing bidder who had saved $100 000).
They are charged for the default through the interest gap between savings and
borrowings. In severe cases, the bank's bond and share
holders have to take the responsibility, and in extreme economic crises,
government bailouts may be used to restore the lenders.

Question:
Is it reasonable to let the bidder with borrowed money get the property, (a)
from the point of view of the total economy, and (b) is it moral from the point
of view of the total society?

In periods of
very low interest rates, "borrowed money" has the capacity to win
over "own money" in any trade. When transactions in fiat money are
routinely and increasingly leveraged (loan-based) year after year, all may seem
good since economic growth is seen as good. But this kind of growth is
cancerous. It cannot be defended as good economy, or good morality.

With
a cancer of excessive leverage, an economy has come a long way from a
Gemeinschaft-type society where all money debts except the smallest ones were
next to immoral. It is also a considerable distance from the original
Gesellschafts in which frugality, diligence, and industry were dominant
economic virtues. German Chancellor Angela Merkel represented the latter when
she warned the United States in November 2008 that its efforts to cope with the
banking crisis by keeping money cheap and further encouraging people's
borrowing could plant “the seeds of a similar crisis in five years’ time”.

Money
thus enters all sorts of transactions and makes them open to calculation.
Simmel (1907) elaborated the Marxian idea that being able to calculate
everything with money inevitably depersonalizes human life and culture. It is
true that the market economy opens for calculation in social intercourse. But
this does not necessarily mean that social relations become weak and distorted
by money. Tyler Cowen (2008), who is a professor of economics at George Mason
University, a citadel of market economy, has shown that using money as
incentives is unproductive in some social relations. For example, it is
unnecessary to pay your daughter to do the dishes. In many other relations
using money as incentive is done ineffectively. Cowen wants to help us do it in
smarter ways and gives his book the title Discover your Inner Economist. This
may be an insidious way to promote hegemony of the economic realm over
everything else, an anathema to a many-splendored society.

VivianaZelizer (1997) has showed something more interesting:
people incorporate money into ordinary social relations without destroying the
traditional meaning of these relations. This is done by keeping separate,
mentally or physically, different kinds of money. Cowen does not cite her
findings.

In
the first place, says Zeilizer, people separate their
sources of income. Big windfall incomes from a lottery or inheritance are kept
separate from money in the form of regular salaries or wages or pensions. Zeilizer cites a study of Oslo prostitutes, many of whom
think differently about the money they receive from health benefits or welfare
subsidies, which they very carefully count and budget. By contrast, they would
quite easily blow their prostitution earnings on drugs, alcohol, and clothes.
In the same vane, we may see the several studies
showing that the lion's share of the sizable child allowances in cash that
France and Sweden regularly give families with children are not dedicated to
amusements, wine, and beauty parlors. In the main, they are used to create the
kind of household and living quarters that a family with children needs.

In
the second place, Zelizer notes that people's uses of
money in different social relations separates into different kinds. It is not
only that money for small daily expenditures are separated from money for
big-ticket items. Money for gifts to friends may be identified as different
from money for the children. A loan to a daughter differs from a tip to a
waitress or a payment to a prostitute. Needless to say a husband does not tip
his wife, nor does the wife give tips to her husband.

Zeitler
puts Simmel on his feet after having stood on his head: people transform money
rather than being transformed by it. She does not change the fact that the flow
of life in any modern society is helped by a continuous supply and flow of
money and credits, but she establishes social relations rather than monetary
relations as primary. This fact must be a starting point for the societal
control of fiat money.

Orwell's
irony applies again. Among six societal realms born free and equal — science,
art, economy, religion, polity, morality — the economy has in the early Twenty-first
Century made itself more equal than others. And Ferguson's "square of power" has proven inadequate to cope
with control of its fiat money.

The
practitioners of the common lifestyles that we call The Believers want to walk
through life in touch with a virtual reality of heavenly lights and messages.
They have a lifestyle concerned with sacred words and rituals. With an eye on
the sacred, they develop their courage to face ultimate issues such as the
existence of suffering and death, and the final evaluation of a person’s life.
They usually have cults to cope with the memories of the dead. They are found
not only around traditional centers of worship, but also among the followers of
new belief systems that have gained ground in secularized parts of the world.
They are attracted to the realm of religion.

Religion
is important to the student of society. Contemporary Sinic
(Chinese), and Japanese civilizations may perhaps be defined without reference
to their religions -- but not without reference to morality. Otherwise,
religions seem necessary when we define existing civilizations. We have Hindu,
Islamic and Buddhist civilizations. Within Christianity, the largest religion
in the world, we distinguish between Slavic Orthodox, Latin Catholic, and
Anglo-Protestant civilizations.

The
developed religions rest on the same basic structure as other societal realms,
but the content of the realm of religion differs from that of the economy,
polity, science, and art. Religions have organizations (churches), networks
(sects), and media (scriptures and pulpits). They have Makers, i.e., prophets
who create the faiths; Keepers, i.e., high priests who preserve the faith;
Brokers, i.e., preachers who bring it to the masses; and Takers, believers who
identify with the faith. Religions, like other societal realms, also have Providers,
i.g., missionaries and teachers of the faith to
outsiders and youngsters, and they have Procurers who get privileges, money, etc to aid religious pursuits. (See
Figure 21.1). Religion as a societal realm is different from morality
(Figure 23.1), a difficult fact for many to grasp.

Persons
and organi- zations on
the outlook to other realms for some-thing bene-ficial
e.g. donations and priviliges.

A

Realm

RELIGION

C

Lifestyle:

Believers

D

CardinalValue

Sacredness

E

Stratification:

Piety

F

RewardSystem:

Reverence

G

Rationality:

Salvation rituals

H

Type
of Freedom:

Religious freedom

I

Spontaneous
Order

Non-ritual prayers

The
letters marking the rows are those found in a summary of the various
language-products in society called Table of Societal Realms in Chapter 9. The
letters after "I" continue as columns to make space in the center for
some illustrative examples.

The
English anthropologist Edward Evans-Pritchard has this to say about the
scientific study of religion as a social phenomenon:

I do not deny that
peoples have reasons for their beliefs — that they are rational; I do not deny
that religious rites may be accompanied by emotional experiences, that feeling
may even be an important element in their performance; and I certainly do not
deny that religious ideas and practices are directly associated with social
groups – that religion, whatever else it may be, is a social phenomenon. What I
do deny is that it is explained by any of these facts, or all of them together,
and I hold that it is not sound scientific method to seek for origins,
especially when they cannot be found. Science deals with relations, not with origins
and essences. (1965 p. ??)

The
main part of this statement is unproblematic. Religious life, as mentioned, is
a part of social life and fits all the categories and regularities of our
scheme for analyzing societal realms (Figure 21.1). If we go beyond the
primitive religions that were Evans-Pritchard's topic, we find the structures
of organizations, media, and networks. We find the same roles of Makers,
Keepers, Purveyors, and Takers that occupy other parts of social life. And the
rational pursuit of the sacred can be studied as readily as the rational
pursuit of any cardinal value, be it wealth, power, knowledge, beauty, or
virtue. Nor is it impossible to study such pursuits with the methods and
theories of social science.

The
last sentence in the credo of Evans-Pritchard, however, is unwarranted. It
certainly belongs to science to study origins and in some sense also essences.
The origin of religion is found in the language instinct. Religion grows out of
what we found to be one of the six fundamental components of language, to be
exact, the one we have called emotive
evaluations. Among other things, a religion evaluates the miserable
fact that death is inevitable and that there are moments of suffering as well
as moments of joy on the road to death. The core of many religions
consists of words that help us, not only to live, but to die.

A
well-known definition of religion by American anthropologist Clifford Greetz states:

Without further ado,
then, a religion is: (1) a system of symbols which acts to (2) establish
powerful, pervasive, and long-lasting moods and motivations in men by (3)
formulating conceptions of a general order of existence and (4) clothing these
conceptions with such an aura of factuality that (5) the moods and motivations
seem uniquely realistic (Greetz 1973, p. 90).

Let
us reformulate this in our terminology. Religion is a system of emotive
evaluative symbols about human existence. This system establishes powerful,
pervasive, and long-lasting motivations in men to follow a particular
prescriptive order that is clothed in descriptions with an aura of factuality
that make the motivations uniquely effective.

Religions
are not something that always has been there. They do not appear until beings
have developed a language brain. Only language makes it possible to talk about
death, that of others and your own, to handle our identity (soul) after our
death, and develop collective insights about death. Religion is a
language-product that can express the ultimate evaluation of a life, i.e. what
people often call the meaning of life. It goes without saying that such an
evaluation gets an emotive charge, often a strong one. Not all emotive
evaluations are religious, but some very noticeable once are.

We
note that Greetz's definition depicts religion in a
stage of "realm hegemony," i.e. a religion that expropriates the
societal realm of morality and part of the realm of knowledge. This particular
variety of religious hegemony stands in the way for a many-splendored society,
and it impedes the development of science and morality. This religious
hegemony may be an empirical fact during many periods of human history, but we
have no reason to let such hegemony define religion as Greetz
does. We might even do religion a lasting service by sticking to its core as a
societal realm of its own.

The
existence of religions and their forces is less of a mystery than most people
think. Organized society inhabited by individuals is a language product.
Personal and collective identities are language products. Religion is a special
language product that comes into being because all language-using beings are
mortal. Religion as a special language product that bridges
generations, not only the gap between birth and death, but more uniquely, the
gap between death and birth.

A
considerable understanding of religion can be obtained by basing our reasoning
on the review of Vocabularies
of Identities (Chapter 13 in Book 3). If you have not done so, please read
that chapter before proceeding with this one.

A
self is grounded in the language of identity and expressed in "I am"-
and "we are"-sentences. The Theorem of the Looking-glass Self and
The Theorem of the Authentic Self dealt with this. Other persons sharing
our symbolic environment have little difficulty in recognizing and remembering
the sentences that define us, "our selves."
Such sentences are remembered also when a person has died. A self, as it is
remembered by survivors, is the linguistic base of what is called the 'soul'
(or spirit) of the deceased. In this sense, soul is an acceptable concept in
social science.

The
soul is set apart from the self of ordinary living; this is the beginning of a
separation between the sacred and the profane. At this point in
the development of religion, the sacred may be considered either beneficial or
detrimental or neutral to the earthlings.

The dominions of the
living identities (selves) and deceased identities (souls) are separate in all
religions. However, the belief is common that they may interact more or less
actively. The pathway between the two could be a deep cave that the believers
decorate with painted images. Or, it could be a road into the high mountains, a
trip starting down the Nile, ascension to a heaven beyond the clouds. In
ancient Greek religions the separation was the river Acheron — not Styx as
Virgil mistakenly had it — to the realm of the god Hades, king of the dead. The
dead had to pay the ferryman Chardon to get quickly over the river; some Greeks
arranged to be buried with a coin between their lips for the passage so they
did not have to wait wandering along the Acheron. In the Greek view, the
crossing to the underworld was final; there were no return trips. However,
about Orpheus and a few others we are told that they visited Hades while alive
and returned living.

An image of the
beliefs about body and soul and about life and death in medieval Europe is
given by El Greco to the largely illiterate population of Toledo. El Greco,
born on Crete, trained as a painter in Venice, made Spanish Toledo his home
town in 1570. There he learned about a great benefactor to the city, a Count of
Orgaz, who had lived 200 years earlier. The Count's
memory and good deeds were kept and embroidered by the citizens of the city. El Greco joined his new compatriots in honoring Orgaz by a magnificent painting in Santa Tomé Church. It
shows the funeral of the benefactor.

El Greco was a man of
the renaissance. This painting is set 200 years earlier and captures a virtual
reality common in the High Middle ages. The row of awe-stricken burgers in the
painting divides heaven from earth. The Count’s body is lowered into a dark
grave. Even the officiating priests are awed and astonished when two saints in
golden robes, St. Augustine and St. Stephan, appear to carry the deceased to a
bright heaven. There he is met by Saint Peter with his keys and by other saints
who had gone before him. In this part of Paradise his soul would on Last Day
join his resurrected body.

Christianity triumphed
over Hellenic and Germanic religions for many reasons; one was its conviction
that there is a coming resurrection of the dead. More on this
in a moment.

The big drum beats and
the loud firecrackers at the Chinese New Year are echoes of old ways of driving
evil spirits away. Shamanistic religions accept that some dead are resentful,
and thus their souls should be treated as evil. This archaic tradition remains
in many parts of the world and is particularly strong in Siberia and on the
Korean peninsula. In modern South Korea this religious tradition is probably
stronger than both Confucianism and Christianity. A priest with magical
abilities is called mudangby the
Koreans. They are mostly women. They are believed to have contacts with
the world of spirits. They can solve problems of health and fertility. We know
from part (c) of "Socially Induced
Compliance" (Proposition 15:7) that socially induced compliance
implies that deviants are downgraded.

(a) The more favorable evaluations a person receives in an
encounter, the more hehis
likely to conform to the prescriptions in the encounter.
(b) When a person in an encounter deviates from its customary prescriptions
(norms) the others in the encounter tend to articulate the prescription.
(c) The more persons comply with the prescriptions in an encounter, the more
favorable evaluations they tend to receive from others in the encounter, and
the less they comply the more unfavorable evaluations they tend to receive.
(d) A member of an encounter that violates norms and thereby hurts other
members is met by an expectation (a new norm) that requires him to compensate
the victims in proportion to the damage he has caused.
(e) The compensation shall be given not only to the victims but also to the
victims' significant encounters that have been affected by the violation
(restorative justice).

Some souls — with an
earthly biography that includes incidences of deviance categorized as
"evil" — may not have realized or acknowledged that they are dead,
and they remain in this world. This means that they may bring ill health and
economic disasters to the surviving family members. The mundags
are supposed to help the souls of the dead on earth to move to a divine world
of souls. They exercise authority over the deviant souls according to clauses
(c),(d) and (e) in our Proposition, and they can force
them to stop the misdeeds and to deliver compensation to the living for the
damage done by errant souls.

The formula "from
self to soul" can also be read backwards. When a person dies and his or
her vital breath has left the body, some religions remember this identity as a
phantom image, perceptible but untouchable. In others it becomes a true soul,
separate from the body, but serving as the carrier of a personality. To the
latter, a logical step in the transformation of the language of identities, is the belief that also the livings have souls.
Freud, however, did not like the religious ring of soul (Seele
in his language), and used the Greek term "psyche." Linguistically
speaking, souls or psyches are sentences defining identities that are, or once
were, living personalities. The believers are free to add some divine
attributes that we social scientists ignore. The soul, as we have defined it in
our secular linguistic terms, however, is impressive in itself. It may almost
have eternal life since it can persist as long as a language persists.

The preservation of
the self, we recall, is the key to social motivation. We have concluded in
"The Identity
Maintenance" (Proposition 15:1) that people do all sorts of things to
maintain their individual and collective identities. This motivation also
applies to the extended identify after death. Some people have mummified or
embalmed the bodies of the deceased, but the main effort of mankind has been to
maintain and save souls, a process that requires less technological and more
symbolic activities.

TECH It
happened in Sweden in 2005 that a man ordered that a "www.hisname.se"
should be put on his tomb stone. With the recent advent of digital memories and
web sites of enormous capacities, the surviving identities of a common man may
meet more than an ordinary grave. They may not retain the richness of detail of
his life on earth that was given to a Egyptian pharaoh
in his pyramid chambers. Nor would they resemble the grave to end all graves,
the mausoleum of Chinese Emperor Qin, who died in 210 BC and was buried with a
nearby garrison of life-sized terracotta army soldiers with horses and weapons
prepared to serve him in the afterlife.

But
the digital memory of the living in our century may rival the memory of a
burgher in the necropolis of the city Cyprus, a place so remarkable that old
and new visitors mistakenly call it "tombs of kings." Since
digitalized memories can be copied without error into the media of future
generations, souls can nowadays be given a very long life. I predict that
something like a sacral YouTube will be the cemeteries of the future. They may
also contain copies of the genome of the deceased. The human genome is the DNA
blueprint unique to each individual, a 6-billion-letter code that contains the
directions for making all the proteins in the body: blood, brain, muscle, and
bone. The code is written in combinations of four chemicals known by the
abbreviations A, C, G and T. With that preserved, a dream of resurrection will
also be at hand.

All in all, in all
times, decedents should be free to celebrate and honor their ancestors
according to their traditions or choices, or according to any new practices
that virtual technologies may provide. In a many-splendored society, however,
they cannot use such celebrations and ceremonies for political purposes,
for religion and polity are there separate societal realms. Priestly
proficiencies are not the same as the political skills needed to run a body
politic, and political abilities are different from the qualities required to
lead religious congregations.

Men uphold the social
order that upholds them as individuals. Our Proposition on "Maintenance of
the Evaluative Order" is highly relevant when extended to souls. It
shows how we maintain those social structures that maintain the scales
that give us our favorable self-evaluations. One consequence of this is that
people will defend and fight for their religion. Inclusion and exclusion
mechanisms abound in religious history. Members of a society have an evident
motivation to keep their religion intact even when some of them migrate, like
Jews driven into Diaspora, or the members of different Christian congregations
populating America. Religion, along with some ethnic food, is the last
immigrants give up from the old country.

The fact
that strong forces are let loose by any religion and put the believers
into a defensive position is something that both believers and non-believers
must reckon with. Some of these forces give rise to religious wars, but the
main effort is the enormous amount of human design that goes into the saving of
souls.

When a person has both
a self and a soul (in some religion more than one soul) the sacred domain is no
longer confined to the dead and their dwellings. Sacredness, the cardinal value
of religion, now emerges and becomes a property of the living to hold, develop
and defend.

We know from the
Proposition on "The Development of Selves," cited above, that selves,
the notions of ourselves that we present to others, can be defined by others (the looking glass-self) or
edited by the holder (the
authentic self). Likewise, souls can be shaped by the living bearer and
also edited by his or her survivors. With appreciative editing some souls can
in this way become more sacred and turned into saints or 'angels.' Angel,
defined this way, is not merely a concept in Sunday School,
but in social science, a linguistic product subject to empirical study, like
many other religious terms.

A deceased is a
deviant from the norms of the living. Upon death a person can no longer perform
the usual tasks of being a mother, a father, a brother, a sister, or any other
roles, including slave or king.

Deviance has
consequences. We know from the Proposition "Socially Induced Compliance"
(clause b, cited above) that the relevant norms tend to become articulated
whenever deviance is discovered. So also at funerals.
For example, at a speech at the funeral of a teacher you may hear that she gave
the joy of learning to her pupils, took time to listen to and help them, and
that she kept up with the new knowledge in her fields of teaching, etc. All
these remembrances are articulations of role expectations that society puts on
a teacher. (Cf. Durkheim 1912, chapter 5.)

Another consequence of
deviance is that the deviant becomes socially disgraced or humiliated. (This was
formalized in the second part of the Proposition on "Socially Induced Compliance,"
(clause c, second half, cited above ). Any socially
induced compliance implies that deviants are downgraded. At death a person can
no longer perform normal duties. We know from our study of conformity that a
deviant can avoid the sanctions induced by society when deviance is discovered
by providing an excuse. Also the dead, and
the souls of the dead, need excuses for leaving their positions and social
roles. The most common of excuses are, as we noted, appeals to a higher norm.
When a senior superior calls, you are excused from ordinary duties. The excuse
is a very useful part of the language habits that rule social life.

The superiors who are
needed to excuse the dying from their ordinary duties can be elaborated and
named. They are the 'gods.' The belief in religious gods is much more than the
belief in the souls of shamanism. But the source is the same: a human society
in which identity and social control depend on language. We recall the
conclusion from our discussion onEtic
Conceptions of Impelling Vocabularies in Chapter 17: "the Gods are
emic names given to our impelling vocabularies, writ large." The strength
attributed to a God is actually the overwhelming impelling vocabularies of a
human society, *or of one or more of the societal realms or other life areas in
the society.

In a primordial
society without differentiation into langue-based societal realms, the gods
would be those of pre-language brains, i.e. gods of the hunt, harvest, wine,
female fertility, and territorial wars. A god could also be specific to a clan
or tribe. A god may have many diverse epithets. For example, the Homeric god of
Hermes was the god of shepherds, travelers, athletes, poets, thieves and he
settles as a protector of commerce and weights and measures.

The societal realms
have different cardinal values. Then, each realm can with some justification
let a god specialize in its cardinal value. Although the Roman versions of the
Greek gods retained many diverse epithets, we get a Minerva (Pallas Athena)
ruling over philosophy and wisdom (science), a Mercury (Hermes) ruling over
trade and commerce (economy), a Jupiter (Zeus) ruling over law and order (the
body politic), an Apollo (same name in Greek) for music and the four muses
(art). The congenial religion in a many-splendored society has several gods.

Monotheism is the
natural pattern only in a society in which one realm has acquired hegemony and
dominates the others. Constantine replaced the Greek and Roman pantheon of gods
with the Christian God. One reason was the actual success of Christianity among
his subjects. Another reason was that he saw himself as an omnipotent emperor
of all realms in the empire, and as such he found that monotheism streamlined
his authority as such an emperor.

The same god may
assume several shapes. For example, Dionysus appeared in different shapes until
he finally collapsed under an attack by Titans. The Council of Nicaea in 350 AD
proclaimed and confirmed a very special situation for the Christian God with
three united selves: Father, Son and Holy Ghost. But multiple selves were not
for ordinary Christian people. By contrast, notions of multiple selves and
multiple souls are widely accepted in Eastern Asia and its religions. The idea
that one of them may leave the body and take residence elsewhere is common. A
great divide between world religions goes between Judaism, Christendom, and
Islam on one hand, and Hinduism, Buddhism and other Asian religions, on the
other. Their differences relate, among other things, to the multiplicity,
freedom, and mobility of souls.

The gods call the
dying to leave this world, and this is a very good excuse not to degrade the
dying for poor or nil performance. Instead we thank them and take a solemn
goodbye in a funeral ritual. If the impulse to downgrade a dead person still
lingers on, it is contradicted by another strong social norm: "Nothing But
Good of the Dead!"

In practically all
religious thinking, the gods or goddesses are thought to be immortal. As
immortals, they never have to concern themselves with loss of identity, nor of
any deviances caused by their deaths. Gods are powerful; they may help or harm
or ignore mortals. They may be seen as creatures of vanity in the sense that
they want to be admired, adored, and worshiped. Above all, as Bo Anderson (2008)
suggests in a private communication, gods are set apart, different in kind than
us, on the one hand, and more sacred (holier) than us on the other.

In most religions the
gods help or harm you in this world, not (or not only) in any coming
one. If you build a big temple for gods or goddesses, give them many and big
offerings, and assign many holidays to their honor, then, you can expect to get
a commensurate amount of service from the gods. The more you pray the better
your life on earth will be. If you ignore or curse the gods they may harm you.

The Greek gods of
Homer used such straight trade-offs with mortals. They also added some mischief
and practical jokes both amongst themselves and in dealing with mortals. In no
way did Greek religion ask that you live a virtuous life; morality was
something separate from religion, as is the case in any many-splendored
society. Ancient Greek and Roman religion did not engage in what we call
hegemony of realms. By contrast the Jewish and Christian religions strive to
incorporate and integrate morality under their umbrellas. Then God may reward
in the next world for good deeds performed in this world.

Jews and Christians
have difficulties to understand the purity of ancient Greek religion. They
usually call it "Greek mythology," instead of Greek religion.

John Lennon, in a
song, asked us to imagine a world without religion. He apparently thought it
might be a better world. But not necessarily. A world
without religion would be a world that is not dependent on language for its
organization and thus has no language to form individual and collective
identities — or songs. Alternatively, a world without religion would be a world
of immortals who never have to worry about losing
identity, organization, and everything else that language has brought them as
essential for the survival of a society. The latter world does not exist, at
least not at the present stage of evolution.

To stamp out religion,
as some atheists want, is a pursuit that bumps its heads against the knowledge
of social science, specifically the language-based core of religion that we
have reviewed. As a social science theorist, I must conclude that a society
cannot exist for long without encountering the processes that develop religions.
Such processes may have varying paraphernalia, but they all start with a
language of maintaining selves, turning selves into souls at or prior to death,
and continue with a religious language and practices to maintain these souls.

Critics of religion
would have a more workable and constructive agenda if their mission is
redefined as the debunking of magical elements in religion, not religion
itself.

Once coping with
deaths has given birth to gods, they may become significant others for the
living. The significant others,
we recall, are the holders of the scales by means of which people are or
want to be measured. In the first place we live to please our particular
significant others — be they parents, teachers, leaders, or idols from history
or philosophy. When gods become mankind's significant others, mankind worships
them. Those who select (or are given) Buddha, Jesus, or Muhammad as their
significant other can look for guidance at turns in life from the messages left
by them. They walk through a life that adds sacredness to individuals and
communities.

There can be doubts
and cheating in any life guided by significant others. Let us clarify the
concept of sacredness by a semiotic square (Figure 21.2) so we can investigate
practical problems and deviations of religious life.

The opposite of sacredness
is profanity. This opposition has one leg of similarity with the general
distinction between mundane
and pristine symbols that we have discussed in Chapter 3. Our distinction
between profane and sacred is restricted to the realm of religion. Sacredness,
the cardinal value in the realm of religion, is not necessarily expressed in
pristine symbols. Its symbols, however, set sacredness apart and give it
engaging emotive qualities. It feels otherworldly, and is expressed in a
symbolism of souls and holy icons. Profanity, by contrast, is expressed in
mundane symbols, carnal and materialistic, the symbols of everyday living
outside of and perhaps adverse to sanctuaries, temples, rites, contemplations,
and prayers.

In Judaism sacredness
is achieved by loving God and following the Mosaic Laws. In Christianity
sacredness is a gift of God to the believers through the sacrificial death of
Jesus. In Islam the steps to sacredness include prayer and the reciting of
words by Allah in the Qur'an (Qur'an is Arabic for recitation). In Buddhism the
ultimate sacredness, "crossing over", is reached in Nirvana, a
blissful, spiritual state of nothingness when you become a Buddha. A variety of
different routines in religions may support the expansion of sacredness:
fasting, sacrifices, sacraments, alms giving, incense-offerings, icons,
pilgrimages, hermitages, et cetera.

The search and
accumulation of the cardinal value of religion moves humans and their communities
from profanity to sacredness. The basic paradigm is one of progression in
achieving sacredness, that is, a process similar to achieving other cardinal
values such as knowledge, beauty, wealth, and order. In the Protestant
tradition, John Bunyan immensely popular book The Pilgrim's Progress from
1678 follows this paradigm. It is said to be the most widely read book in
English except for the Bible; it has never been out of print and has been
widely translated.

John Bunyan, however,
in a typical Christian way, mixes up the road from profanity to sacredness,
with the road from vice to virtue. As a social scientist I want to maintain
that the road of sacredness in the realm of religion should be kept
analytically separate from the road from vice to virtue in the realm of
morality. They consist of different linguistic molecules.

The Christian religion
holds that Christ's sufferings on the cross wipe clean the believer's
accumulated sins. This is a redemption process.
Such a process, as we have seen, is not magic; it is a most remarkable process
among our several impelling vocabularies in encounters. Redemption practices
are possible as soon as a language-based morality or polity is at hand. In other
word, it is a way of dealing with prescriptions and coping with our inability
to obey them all. Priests, however, have no monopoly on redemption; such
courses of action can be handled by dramatists, editors of modern mass media,
constructors of commercial games, producers of TV programs, and by many others.
In the theory of the many-splendored society, redemption, strictly speaking, is
mostly treated as a part of the societal realm of morality, not religion.

Christianity makes the
redemption process profoundly religious and magical in its belief that the
victim is the Son of God. Jesus himself preferred to call himself the Son of
Man. But when the time came when he saw his victimage
as inevitable he answered "It is as you say" in his trial at the Sanhedrin,
the council of the Jewish priesthood, on a direct question whether he was the
son of God (according to Matthew 26:63-64).

Religious Pretense is
apparent when symbols of sacredness are used insincerely or faked altogether.
Here we end up on the right side of the semiotic square of sacredness among
those who pretend to seek it. Judaism and Christianity take religious hypocrisy
very seriously; their God reads hearts. In Greek and Roman religion there are
instances when men can cheat also their gods with pretense. In general, it is
helpful to distinguish situations in which religious pretenders cheat their
fellowmen and situations in which they cheat their gods.

Religious language may
be colored by honest bouts of doubts. The church father's confession: "I
believe. Help my unbelief” is a case in point. We are on the left side of the
semiotic square, marked as Religious Doubts. Buddhism and Christianity accept
doubt as a normal and recurrent state of the religious mind. Thomas remains
Christ's disciple also in his doubting period. Islam has a more rigid view; the
doubter is treated as a traitor and infidel, perhaps worse than the infidels
who never had a chance to know new better.

The idea of a
paradise, a Garden of Eden, at the beginning of time is a powerful image in the
opening chapters of the Hebrew Bible. The early Christians thought that the end
of the world comes in a very near future. The dead would then be resurrected,
and the faithful among them go on to live in a new Paradise.

What was Paradise like
to the early Christians? Saint MorEphrem, the Syrian (ca. 303-373), wrote a famous hymn
cycle "On Paradise." Unlike other Fathers of the Christian Church he
did not know Greek or Latin, and he wrote in his native tongue, Syriac. His work has stayed alive in the Syrian Orthodox
Church. Early translations into Greek gave him the posthumous honor of being a
doctor of the Church. In 1990 a very accessible English edition of "On
Paradise" appeared in a commented translation by Sebastian Brock.
Apparently the Syriac language cannot as easily as
Greek develop pristine concepts suitable for religious dogmas; it is more based
on what we have called Median symbols than Saussurian
ones. Ephrem's vision of Paradise is full of poetic
everyday images, approaching the divine as something hinted at by ordinary
neighbors looking into a garden from various angles rather than as a fossilized
theological concept.

Ephrem's
Paradise (like the original Jewish one and the later Dante's) is a mountain. It
is bounded and has three circuits, one where resurrected bodies wait to be
united with their souls, who in turn wait in the second circuit, and then taken
to live forever in God's top circuit. The paraphernalia are the Fence guarded
by the Sword, and Robes of Glory — no nakedness here! A Tree of Knowledge
stands at the first entrance and a Tree of Life at the second entrance.

In Paradise bodies
become rejuvenated and lovely. Ephrem is wonderfully
concrete: they do not have to eat; the old ways are gone in which "all we
eat the body eventually expels / in a form that disgusts us" (Hymn 9:23). Instead food comes as a delicious breeze
that is inhaled; wonderfully concrete imagery.

Most important, in
Paradise people live in harmony:

No blemish is in them,
for they are without wickedness;
no anger is in them,
for they have no fiery temper;
no mocking scorn is in them,
for they are without guile.
They do not race to do harm —
and so themselves be harmed;
they show no hatred there,
for there they are without envy;
they pronounce no judgment there,
for there no oppression exists.

(Hymn 7:11)

A vision of harmony of this kind recurs
in many modern utopias. It has simply wandered from the realm of religion to
the realm of politics, from heaven to earth, from the afterlife to this life.

Ephrem's
songs were translated also into AramicSyriac, and became known to
Muhammad. It is instructive to compare the Arabic edition of Paradise
found in the Qur'an with Ephrem's song cycle. The geography
may be roughly the same, the resulting harmony is the
same. The Muslims, however, are taught that Paradise opened to the faithful,
not at a future end of the world, but immediately after a person's death. Ephrem is specific about a bodily function in Paradise such
as hunger. The Qur'an is specific about sex.

Without further ado a
Muslim man in Paradise could meet its virgins, the houri.
They are dark-eyed maidens with round and upturned breasts and appreciative
vaginas. On earth they might have been good Muslim wives who knew the practice
of love. In the luxurious hereafter, Allah had made them young virgins again, ready to meet dead devout Muslim men. These men could
be their earthly husbands, or more often men who had served in battles for the
faith.

The legend of the houri has been reviewed, often in a mocking tone, in the
West in the wake of Islamic suicide bombers. Few, if any, of the recent
commentators on these sexual fantasies and their motivational force in men seem
to know that they are an addition to a version of Paradise by a Christian
Doctor of the Church, a fact noted by Andræ (1944),
perhaps earlier by other scholars. Their respective paradisiacal versions
reveal differences. Ephrem abhors sex and celebrates
virgins. The Qur'an imposes a sexual morality that violates the dignity of
women, a flagrant violation of women's equality and human dignity, both in this
world and the one hereafter. Women are presented as men's sex toys without the
right to say No to their husbands in this life. The houris
cannot say No to men who arrive in Paradise. Seventy-one of them flock to serve
every arriving martyr.

Is this wet dream of
the Prophet really authentic? Not necessarily. Some passages in The Qur'an are
more easily understood with a Syriac-Aramaic lexicon
than with an Arabic one (Luxenberg 2000). The
"71 houris" are in AramicSyriac simply "71 grapes." Mohammad, born
in a trading community and first married to a widow of a Mecca tradesman, had
probably himself dealt with tradesmen who spoke Aramaic Syriac,
a lingua franca of the region.

During its first
centuries in our chronology there was a vast expansion of Christianity. Many
circumstances contributed to the numerous conversions to the new religion
(Brown 19??). Its idea of a bodily resurrection in a Paradise at the end of
time attained a vast appeal in the Hellenic world. Life as a path to Paradise
was much more appealing than life as a path to the shadows of Hades.
Christianity spread rapidly through the Middle East, North Africa, and Europe,
replacing other religions. Its vision of Paradise created the
"long-lasting moods and motivations in men" that Greetz
sees as a defining element in a religion. And its adoption by the Roman empires
as a state religion added to its success.

Soon, however, the
Muslim version of Paradise became even more appealing than the Christian one,
at least to males. It promised not only the pleasures of a new wardrobe, a
delicious virtual cuisine, and a resting bed in the clouds touching the slopes
of Paradise, but also the immediate pleasures of sex. The Muslim warriors
defeated the Christians in the Greater Middle East and North Africa. In Europe
they made inroads into Spain and the Balkans. They also reached India. We may
note in passing that after some centuries there, the princess and princesses of
Arab decent began to understand and copy the artistic and sensual life of their
Indian counterparts, as described in Kamasutra.
For a period, a truly sensate and sexual culture was part and parcel of a
Muslim elite in India, proving that the sexual teachings of mainstream Islam is
not alone and invincible. In the later colonial phase of the Indian
subcontinent, evangelists from England tried to bring both Hindu and Muslim
camps into a puritanical fold, not only by conversions to Christianity, but
perhaps mainly by persuading the colonial power to support sexually puritan
streaks endemic in both Hindu and Muslim religions.

Behind Muslim
successes in replacing Christianity in the Greater Middle East and North Africa
there were several secular factors, some local and temporal, but the
pornographic version and vision of the Qur'an's Paradise provided the Muslim
side with the world's most effective religious reward system. It actually took
a long while for European Christian powers to realize that they were not
confronted by some barbarian tribes from southeast but by a rival world
religion and civilization.

In the main, however,
I would credit the different organization of the societal realm of religion by
Christianity and Islam as the main explanation to the success of the latter.
Recall our Proposition 7:7 "The Rule of Realm Expansion" that points
at consequences of different balances between the volumes of organizations and
volumes of networks in societal realms. A cardinal value and its societal realm
extend its reach primarily when its networks dominate over organizations, and
it consolidates and defends its reach when organizations dominate over its
networks. Consider the difference between the Christian and Muslim world at the
time of the great Muslim victories in the eighth of the Christian centuries.

Christian world
religion was modeled on the Roman Empire, a centralized organization in
the true meaning of that word. As the empire split into a Western and an
Eastern part so did Christianity, one part headed by a Pope in Rome and the
other by a Patriarch in Constantinople, each with a hierarchy of bishops and
priests spread over its territories. By contrast, Muslim world religion was
modeled on local caliphates. Local imams with their mosques and congregations
did not report to any central religious authority. They formed a network
with common focus on Mecca and the Qur'an. Like in Christianity with its split
between Roman Catholics and Greek Orthodox branches there was an early split
between Sunni and Shi'a Muslims. The latter split had little or nothing to do
with religion. The Prophet who also was the political leader and military
commander had left no son. A conflict erupted about political succession
between Mohammed's in-laws (Shi'as) and rival Arab clans (Sunnis). Sunnis took
Bagdad and its empire from the Christians, Shi'as took the Christian North
Africa including the important Egypt and its possessions.

Bureaucratic
infightings and the long chains of command within both the Roman Catholic and
the East Orthodox Churches as well as in the kingdoms supporting them made the
Christian side slow to respond. It actually took centuries before the
Christians organized counteroffensives in the form of the Crusades. In the
meantime Christianity had been the victim of the long array of local — and to
the Christian leadership mostly unpredictable —
military actions by decentralized Muslim units. Eventually most of the
conquered territories were put under the sway of Saladin, a Sunni hero, who was
Sultan of Egypt and Syria. He also led the opposition to the Third Crusade, and
recaptured Jerusalem from the major Christian counter offensive. Sunni was
hence the mainstream of the Prophet's religion. And all the lands between India
and Spain were no longer ruled by
Christians.

As we have noted, spontaneous orders grow in networks,
but they may be institutionalized in organizations and their contents then
enjoy a long life. The Virgin Mary provided a spontaneous order in the Middle Ages. In A Distant Mirror, Barbara Tuchman
vividly describes the universal access that Mary provided in the fourteenth
century for anyone in any circumstance. In daily life the Church was comforter,
protector, and physician. You could join in its cults and services and pray to
God with the words of you priest. But there was also a channel accessible for
all outside all rules of the books:

The Virgin and patron saints gave
succor in trouble and protection against the evils and enemies that lurked
along every man’s path….Above all, the Virgin was the ever-merciful,
ever-dependable source of comfort, full of compassion for human frailty, caring
nothing for laws and judges, ready to respond to anyone in trouble; amid all
the inequities, injuries, and senseless harms, the one never-failing figure.
She frees the prisoner from his dungeon, revives the starving with milk from
her own breasts….A hardened murderer has no less access. No matter what crime a
person has committed, though every man’s hand be
against him, he is still not cut off from the Virgin. (Tuchman 1978, p. ??)

Outside the
hierarchies of the church, prayers to the Virgin or to your patron saint form
an order of petitions, thanksgivings and worship, open to every Catholic. A
prayer such as “Délivre-nous de la rage des Normans”
(For the rage of the Northmen save us, O Lord)
probably developed as spontaneous appeals by scared individuals in the wake of
invasions of French territories by brutes from the north; later they became
ritualized in church services.

Some separation
between the mundane and
the pristine, as introduced in Chapter 3, has taken place in all known
civilizations. Pristine orders could emphasize various visions. The wisdom of
philosopher-kings, cosmic harmony, the regular order of sun and moon, the
golden rule, the struggle of the Gods in a Valhalla or a Pantheon, the will of
an Almighty God are some examples.

The symbols in
religion have emotive qualities and they may also have more or less of a
pristine flavor. But they are not always sufficiently pristine for
intellectuals. Plato scorned the Athenian gods of his time for their deceptive
habits; occasionally they actually behaved like drunkards, hooligans, and
rapists. They were not pristine enough to serve as ideals or significant
others.

Generally speaking,
religiosity in the Western tradition is based on a theme clearly expressed by
the Israeli prophets of acting in the world without being of the
world. Thus religiosity required man to work diligently also in mundane
pursuits, and sometimes even to rework and reform the everyday world.

In the East, not only
the Buddhism, but both the older Zoroastrian dualism and the traditional Indian
doctrine of karma, allowed the religious intellectual to flee from everyday, mundane pursuit into a life of
contemplation. Here the religious intellectual did not have to reform the
world. Nor was he bound to perform magical rites for his fellowman, although
some of them apparently did. His main relation to the mundane world was to make
sure that he got material support.

On the societal level,
the tension between the pristine and mundane may be resolved by isolating the
pristine into sects, monasteries, temples and similar institutions. Or, it may
be let loose in the society at large as fundamentalist movements with utopian
and sometimes revolutionary ideologies.

Buddhism started as a
sect within the world of Hinduisms. Hinduisms have a pristine vision of
hierarchical castes and of rituals for their members to achieve purification in
successive transmigrations. This edifice was rejected and reformulated by the
teachings of Gautama Buddha. His pristine vision expressed man's union with all
life, including its sufferings, as a single whole. And, as we know, Buddhism
grew into a world religion. By the year 1100 AD practically all Sanskrit texts
on Buddhism were translated into Chinese. In China, Buddhism became an antidote
to the strict pristine and hierarchal order of Confucianism, thus repeating the
humanizing and equalizing mission it had first performed on the Indian
subcontinent.

Christianity
originated as a sect within Judaism, the Congregation in Jerusalem whose faith
survived the execution of Jesus. The Congregation celebrated their memory of
Jesus' teachings, and elaborated on what they believed were his miracles and
his Resurrection. Saint Paul, in his early career as upholder of the laws of
Judaism, had belonged to a group who persecuted the Jerusalem Congregation as
well as other deviants from Judaism, for example, Hellenized Jews. After his
conversion he rejected the Mosaic dietary laws and circumcision practice,
relying on God's grace for his salvation rather than on any personal sacrifices
or rituals.

Paul apparently did
not mind if Jewish-born Christians continued to follow Mosaic instructions, but
he was adamant that the many other converts should not be trapped by them. He
embraced both Jesus, whom he called Christ, the Greek word for
"Messiah" — both words mean "the anointed" — and also all
the people of the Hellenized world, Jews and Gentiles alike. Perhaps he never
could establish particularly good terms with the original Congregation in
Jerusalem. But he reformulated their vision of the sacrificial death and
resurrection of Christ as the salvation for all people, and became a
father of the Christian world religion. In assessing his importance it is well
to keep in mind that his epistles in the New Testament are placed after the gospels
of the evangelists, but that they were written decades before them. Paul's
texts thus have a special value as sources for the study of ideas in early
Christianity.

Most religions are
tempted by what we called the fourth
principle of magic: all happenings and creations are willed by some
being. Religions may hold that at least some features of the natural and
social world were created intentionally by some being. In olden days this was a
common tenant of most thinking about both nature and social institutions. You
can debunk it by saying, as we do, that religion is a product of human
language. It does not detract anything from religion to date its beginning at
the time of the beginning of the word. It should be said loud and clear that
the idea of "intelligent design" owes its popularity to the fourth
principle of magic, not to convincing scientific reasoning.

The religious belief
in scriptures or other kinds of testimony as having been divinely produced or
inspired is another expression of the fourth principle of magic. There seem to
be a general tendency in popular religion to expand such testimony. This is
part of the growth of sacredness. The present expansion of Roman Catholic
beautifications initiated by Pope is another case in point.

It is interesting to
note the religious scholarship has often tried to rein in such expansions. The
many Christian gospels during the first three centuries after the death of
Jesus of Nazareth — including those of James, Judas, Peter, Thomas — were
after much controversy harnessed at the time of Pope Innocent 1(401-417) into
four canonical ones, Matthew, Mark, Luke, and John, all written in Greek during
the first century BC. In our days Muslim theological scholars are reducing the
many hadiths attributed to Muhammad.
The Qur'an itself, however, resists such efforts. At least two older and
somewhat different version of this scripture are known to exist. (I do not cite
where they are located since it may encourage Jehadists
to destroy them and murder the scholars working with them.)

A very informative
encounter between two teachers of religion, one a Pharisee, that is a certified
scholar of religious law, and one a self-taught scholar, both debunkers of
magic, is retold in Mark 12:28-33. The autodidact is Jesus, the name of the
other man remains unknown and he is simply called religious teacher. The two
men are very different: one is a conservative scholar and the other is a
dropout — with a somewhat revolutionary bent — from the carpentry trade.
Both lived in a region that, for three centuries, had been under the sway of a
mental empire, the Hellenistic culture — perhaps the same kind of experience as
many people today have in the mental empire of an Americanized world.
Geologists have found remnants of Greek urns (the Coca-Cola and ketchup bottles
of those days) and mosaic and marble images (the Hollywood icons of those days)
in nearby communities where the two teachers had grown up and eventually met
each other. Moreover, the country in which the two men had their conversation
had for a hundred years been under the influence of Roman culture, and had
lately been formally occupied by the Romans. Both men wanted to resist alien
influences by reinforcing their biblical tradition.

One of the teachers of the law came and
heard them [Jesus and his students] debating. Noticing that Jesus had given
them a good answer, he asked him, "Of all the commandments, which is the
most important?"

The most important one,"
answered Jesus, "is this: 'Hear, O Israel, the Lord our God, the Lord is
one. Love the Lord your God with all your heart and with all your soul and with
all your mind and with all your strength' [Deut. 6:4,5].
The second is this: 'Love your neighbor as yourself' [Lev. 19:18]. There is no
commandment greater than these."

"Well said, teacher," the man
replied. "You are right in saying that God is one and there is no other
but him. To love him with all your heart, with all your understanding and with
all your strength [cf. 1 Sam. 15: 22], and to love your neighbor as yourself is
more important than all burnt offerings and sacrifices [cf. Hosea 6:
6]." (Italics and references added here.)

Both men in this dialogue are steeped
in the world of the Hebrew Scriptures. And both men are in agreement about its
core message: it is your mindset of love of God and love of your fellowman that
counts, not any magic rites such as sacrifices on an altar. And they also
agreed that their God is unique.

Thus Jesus did not
appreciate the magical elements of sacrifices at altars in the Jewish Bible. In
spite of this, magic came to abound in the Christian Gospel about the life and
teaching of Jesus. He is depicted as a magician performing miracles. The
evangelists of the New Testament, who decided to record their beloved and
impressive story of Jesus for others, apparently found it natural to impress
the audience with a string of magical episodes, congenial to the symbolic
environment of the time. They gave in their way Jesus homage by includ. "All of this were
done," they unabashed admitted, "that it might be fulfilled what was
spoken by the prophet ..." (Matthew 21:4 and several other places.)

The audiences of those
days found such episodes natural. A modern reader can be more moved by the
Sermon on the Mount, one of the most powerful moral messages in human history,
without the attached magic of Jesus' feeding a multitude with two fishes and five
pieces of bread. When Jesus sees his victimage
inevitable, he gathers his nearest followers to a last supper together with
bread and wine. Later the Church Fathers added more magic to the stock of the
evangelists. The communion with bread and wine became the magical highway of
the Church to salvation and eternal life.

Immanuel Kant tried to
promote a rational religion without magic and mystery — actually mostly a
God-given morality — also stressing neighborly love and mutual duty. Max
Weber (1920) in his whole collection of studies of world religions, found only
three traditional religions that had thrived without magic. These three are the
Indian doctrine of karma, Zoroastrian dualism, and the Calvinist doctrine of
predestination.

Religious freedom is
something very different from respect for religions. In the Jewish tradition
coercion is not used to bring non-Jewish people to the faith. In the history of
Christianity, coercion has at times been used in spreading the faith, although
violence in missionary work was not condoned by the Bible in missionary work.
In both Judaism and Christianity, the thesis is that God endows his believers
with a freedom to accept and reject his messages.

In the discussion we
reviewed between the two religious teachers in Mark 12:28-33 there was also
full agreement on the unique character of their God. A modern interpretation
reads:

The God of Abraham, Isaac, Jacob and
Jesus is unlike any other God known to the ancient religions of Greece, Rome or
the Middle East.... Uniquely, this God wishes to be worshiped in spirit and
truth, in whatsoever manner conscience directs, without coercion of any sort.
This God reads hearts, and is satisfied only with purity of conscience and
conviction. Those who belong to any other religion or tradition, or who count
themselves among agnostics or atheists, are thereby given by this God equal
freedom. They, too, must follow their individual consciences. This God wishes
to be worshiped by men and women who are free, not under duress (Novak 2002).

The freedom to accept or reject divine
communications is much less clear in Islam than in Judaism and Christianity.
Where this vision exists it makes believers resistant to being overruled by
hostile antagonists among the people, or by the actions of the state in any of
its branches. It also opens the road to a more secular philosophy of life, a
religion without magic.

The fall of the Roman
Empire in western Europe weakened the power of the state,
but left the Roman Catholic Church strong. During the Middle
Ages the Church had far more influence on education than it had had under the
Romans.

The Reformation did
not put a stop to this. It rather made the literacy of the masses ever more
urgent an issue. Education was usually conducted in private
schools. The Swedish ecclesiastical law of 1686 ordered ministers of the
Lutheran State Church to hold regular, systematic examination on the catechism
in households; these interrogations were documented, as was the literacy of the
members of the household. Most private schools that taught reading were
subsequently made redundant by the establishment of a state monopoly: in 1842
the Swedish Riksdag voted for a six-year compulsory
elementary school. In 1888 the clergy no longer had to conduct examinations in
homes or record literacy.

This weakening of the
churches' influence on schools was typical for all Europe. Morning prayers
in schools were the last vestige of the power the church had once had. After
the end of World War II, they were gradually phased out in all of western Europe. As the victor in the Spanish civil war in
the 1930s, Franco returned the power over education to the Catholic Church, but
after his death in 1975 and the defeat of Spanish fascism, education once again
fell under the aegis of democratically elected politicians.

Freedom of religion
guarantees that different religious persuasions can coexist. The schools can
therefore change from teaching a religion to teaching about religions. For
publicly financed obligatory schools this has been a much used opening. Anyone
who desires to learn more about his own religion has to turn to instructions by
churches, synagogues, temples, or mosques. In contrast to the teaching of other
activities in other societal realms such as exercises in democracy, carrying
out simple business transactions, practicing or performing in art, religious
practices such as mass or prayers have been expelled in publicly financed
schools in most Western countries. In France and the United States this policy
is over two hundred years old.

Parochial schools
provide general education in addition to religious instruction in the own
faith. Whether the study includes world religions varies. It is difficult to
teach history or geography or social science without mentioning them.

In science we reject
any reasoning using our fourth magic principle — that all happenings and
creations are willed by some being — to subordinate science to religion. The
participants at the annual meeting of the American Society for the Advancement
of Science in San Francisco 2001 heard Pervez Hoodbhoy,
professor of nuclear and high-energy physics at Quaid-e-Azam
University in Islamabad, cite a guide to teaching
chemistry in the Islamic way, decrying the usual way in which the formation of
water from hydrogen and oxygen is taught. "No, says the book, the teacher
must say that when hydrogen and oxygen combine then, by the Will of Allah,
they turn into water." Such a formulae, of course,
has no place in natural science; it adds nothing of scientific value. It is
simply an unwarranted claim of hegemony in society on the part of the realm of
religion. Such claims have no place in a many-splendored society.

All world religions
except Islam are reasonably compatible with a many-splendored society. A
religion with a founder who says "My Kingdom is not of this world"
(John 18:36) can easily live with and in a many-splendored society of this
world. However, when Christianity is corrupted into political, economic, or
cultural fundamentalism it becomes unfit for a many-splendored society.

The case is more
difficult for the religion that said "Allah is great and Mohammed is his
Prophet." Again and again the Prophet’s words in the Qur'an remind the
reader that the Prophet's followers will go to Paradise and the infidels in all
walks of life will go to Hell. Even good people outside the Muslim faith have
no hope of a future. (As a Hamas leader who had taken a liking to a visiting
Westerner journalist said in the 21st century: "Too bad you will go to
Hell.")

In Muslim faith
another sharper tenet is never far away. "Allah is the greatest and
Mohammed is his final Prophet." If Mohammed is the last prophet there is
no possibility for new prophecy to improve on his messages. Thus the Muslim
world is stuck with the messages in the Qur'an, all of which are said to be
dictated by Allah through the Archangel Michel. All progress made elsewhere,
before and after the Prophet's teachings in Mecca and Medina in the Middle
Ages, is irrelevant to the faithful, who may even regard it as sinful.

Other great religions
accept progress. For example, the Jewish religion documents progress with the
notion of Jove's journey (Deuteronomy 5:2-3, Judges 5:4-5). He traveled from
the mountain of Sinai where he had been the thunderous God of Moses' nomadic
tribes to the land of Canaan, where he became the temple God in a city-based
dominion conquered by King David.

Muslim religion, alone
among the great religions, does not allow for development and change, only for
tradition. The aggrandizement of the Prophet to have the last and final word, is, of course, a restraint for the human spirit.
Specifically, Dawa, the Muslim missionary
preaching and its effort to establish religious sovereignty over all realms in
society, creates a spiritual straightjacket covering politics, science, art,
and, not the least, family life.

The
Muslims ruled Southern Spain for over 800 years, but the period of civilized
tolerance lasted just over a hundred years. It succumbed, not primarily to
the conquests by Christian warriors from the North, but by repeated influxes
from traditional Mohammedans from the south (Menocal
2002). Musa ibnMaymun
(Maimonides), the Jewish medical scholar and philosopher, did most of his
life's accomplishments in the Caliphate of
Cordoba. But in the end he had to flee to Egypt. He said about Cordoba's
Arab rulers: "Never did a nation molest, degrade, debase, and hate us as
much as they" (cited from Thornton 2007, p. 92). His equally famous
contemporary in Cordoba, IbnRushd
(Averroes) who had taught Aristotle to Europe also died in exile. He had fled
from Cordoba to Marrakech. He was an Arab and Muslim, but that did not help him
from the Jihad forces of violence and intolerance. Cordoba can be cited, not
only as "the ornament of the world," but also as a definitive proof
that a built-in hegemonic dogmatism in Islam kills achievements of high
civilization with the score 700 years against 100 years.

The Muslim Dawa preaches a straightforward case of what we have called
realm hegemony. Over time, its message has resulted in a backward striving
among the Prophet's orthodox followers. (In Iran at the time of this writing, Dawa is also the name taken by a Shiite ruling reactionary
party.) The only area of progress that seems at all times have been fully
accepted within radical Islam is progress in weaponry.

The Muslim Brotherhood
that started in Egypt at the dissolution of the Ottoman Empire after World War
I has been a model for many other Islamic radical movements of the Twentieth
century. The ideal society of the Brotherhood and its counterparts in other
countries is the one depicted in the Qur'an and its concern in present days is
the dignity of Muslim communities and states and the unfailing wellbeing of
their populations.

It is, however, a sure
ticket to an inferiority complex for anybody in the modern world to have as
one’s ideal for a society the once war-prone clans of Medina, a temple and bazaar
city in a desert setting in the Middle Ages, ruled with Mohammed’s
personal (sultanate) authority. It may in effect become a quite painful
dissonance for those who believe that their Allah is the greatest. It causes a
massive defensive bilge to observe a world outside Muslim confines and yet to
have to deny its advances, pleasures and opportunities which have become so
visible and close through modern mass media. Predictably, a resentment of
Western wealth and personal freedom (particularly for women) is close at hand
in contemporary Islamic public opinion. It causes a reckless indignation that
is fuelling a current jihad against the Western ways of life that is proclaimed
by a minority but important imams. A similar resentment seems also to be emerging
against the good life around the skyscrapers in Japan, South Korea, and in the
modernized parts of India and China.

As the world entered
the 21st century, the response to jihad is not war between civilizations, but a
struggle to defend all civilizations and its many-splendored features against
assaults on freedoms and on presently popular lifestyles. It is also — not to
forget — a struggle between Muslims of different persuasions, the currently
violent jihadists, the traditionalists, and the reformed. All Muslims worth
their name, however, are fundamentalists in the sense that they believe the
Qur'an is literally inspired by Allah.

Large and influential
numbers of contemporary Muslims realize (or will soon realize) that terror and
violence of the Al Queda type is a counter-productive
Dawa. Their brotherhoods instead look for a takeover
in Western democracies by means of mass communication, street demonstrations,
fellow travelers, and effective use of election ballots. They will demand
legislation requiring "respect" for Islam, for the Prophet and his
messages. Unfortunately, also any democratically enacted Dawa
means religious sovereignty over all realms in society. Any Dawa
version of “respect” is a good-by to the prospect of a
many-splendored society with societal realms of autonomy. That is why this
author, for one, is unwilling to grant blanket respect to the Islamists.
Respect for religions requires another test.

Needless to say,
people are sensitive to anything that relates to the ultimate evaluation of
their lives. To attack a religion that guarantees the self-respect of its
adherents is risky business. The response of those who are wounded in their
religious beliefs can be very aggressive. No wonder that religious groups
demand "respect" for their religion. This respect can be given by the
social scientists to the core evaluative parts of their religious views without
surrendering the values of science and scholarship. Thus we shall not mock some
people's conviction that God loves them or that they are chosen for eternal
life in His Paradise, provided the paradise is religious and not a vision of
any other realm such as economy, science, politics, art, or morality.

Curtsey to religious
convictions applies only to central religious elements of religious emotive
evaluations. It does not have to apply to their executive evaluations such as
market prices. The taking of rent, the price of money (a typical executive
evaluation), became a favorite topic in medieval religious discourse (Nelson
1949). This topic belongs in the realm of economy, and the religious views
about it were and are usually inconsistent, irrelevant, and misguided.

Nor does the respect
for religion have to apply to its embedded descriptions. Descriptive matters –
everything from cosmology to conceptions of diseases – belong in the realm of
knowledge and here the rules and findings of natural science apply. As
scientists we have both the right and obligation to discard many traditional
religious views about factual matters as mistaken and superstitious, and
sometimes dangerous to health.

In a many-splendored
society, most basic prescriptions belong in the realms of morality and
jurisprudence. Morality is a realm with rationalities of its own, and its ethic
may be secular and not religious. In civilized morality both men and women are
treated with dignity, and discrimination on the basis of sex is unacceptable.
Legal prescriptions are enacted in a political process with procedures of its
own, not religious rules. A social scientist's "respect" for a
person's religion thus need not apply to everything this person happens to call
"my religion." The respect we accord the believers can be restricted
to the core emotive evaluations of their faith, the ones that deal with the joy
and sorrow of living and the agony of dying, and the selves turning into souls.

Since religion
includes statements about the ultimate evaluation of a person, it has proven
open to powerful trade-offs between the mundane and the pristine world. A
common message from priests follows this clever paradigm: "Do this in the
mundane world and you will be rewarded in the pristine heavenly world!"
Such deals — for a deal it always is — may have great consequences. It may
promote civilized actions or uncivilized actions, Mother Theresa's actions for
the poor and sick, or those of a suicide bomber against innocent civilians.

It is easy to find
instances when the tradeoff between worldly actions and otherworldly rewards
have uncivilized consequences. Richard Dawkins is a physical scientist who does
not understand that the existence of religion is as predictable from social
science as a falling apple is predictable from physical science. In his
pro-atheism book God he does not distinguish between religion and
superstition. Nevertheless his catalogue of the ills of religion is relevant:

Imagine, with John Lennon, a world with
no religion. Imagine no suicide bombers, no 9/11, no 7/7, no Crusades, no
witch-hunts, no Gunpowder Plot, no Indian partition, no Israeli/Palestinian
wars, no Serb/Croat/Muslim massacres, no persecution of Jews as
'Christ-killers', no Northern Ireland 'troubles', no 'honour
killings', no shiny-suited bouffant-haired televangelists fleecing gullible
people of their money ('God wants you to give till it hurts'). Imagine no
Taliban to blow up ancient statues, no public beheadings of blasphemers, no
flogging of female skin for the crime of showing an inch of it. (Dawkins 2006, pp. 1-2.)

Not all of these
repugnancies are due to a hegemony claimed by the religious realm. Some are
strictly inside the religious realm and nevertheless disgusting. Needless
to say, religion can claim neither respect nor tolerance when cruel and
uncivilized events like the ones listed by Dawkins occur. This is not to say
that atheists are less prone to cruelties than believers. Remember Hitler and
Stalin!

The hope of a paradise
continues its bloody trail into modern history both in its Muslim version of
Jihad and in versions of secularized Christianity in which paradise no longer
is an eschatological destination but utopias to be realized in our time in this
world, for example, the paradises promised by Communism or Nazism. “The history
of the past century is not a tale of secular advance, as bien-pensants
of Right and Left like to think. The Bolshevik and Nazi seizures of power were
faith-based upheavals just as much as the Ayatollah Khomeini’s theocratic
insurrection in Iran. The very idea of revolution as a transforming event in
history is owed to religion. Modern revolutionary movements are a continuation
of religion by other means.” (Grey 2007, p 2.)

Religion as a societal
realm has thus had enormous consequences for another realm, the body politic.
What originates as religious actions may continue in history as secular ones.
Far from all of these impacts belong in the dark pages of history. Here are
three examples as a small counterbalance to Richard Dawkins' list.

There are only tenuous
intellectual bridges between democracy in classical times and modern times.
More or less knowledgeable references to Athens were made by the promoters of
democracy in Europe and America as a solution to the political conflicts of the
Eighteenth Century. But, as we have noted, there is no historical continuity
between Athenian democracy and contemporary democracy; in particular, our
democracy is a novel organization rather than a new ideal.

Some radical
Protestant sects on the British Isles had an important role in inventing our
democracy. They were not in the mainstream of Episcopacy, nor of
Presbyterianism. They were radical even for the pious Cromwell who held their
political heirs, the Levelers and the Diggers, imprisoned in the Tower of
London. These sects developed man's relationship with God as a strict
person-to-person relationship, neither requiring the intervention of any
priest, nor needing any different ranks among members. Anyone in their
congregation could convey divine messages, and everyone's word was of equal
value. Herbert Tingsten in his text on democracy
(1965, pp 20-23) has summarized the historical
research on this topic. "Perhaps the most typical," he says,
"were the Quakers, who believed in an 'inner light' which directed each
individual and was capable of creating a synthesis of the various opinions
which were expressed in discussion. This they called 'the sense of the meeting' (p
21)." This practice in religious assemblies was transferred to
political assemblies, a gift from the societal realm of religion to the
societal realm of the body politic in a country that already had a division
between the monarchy and the legislature. For centuries, however, the
conservatives in Parliament resisted the additional demand of radical Puritans
to broaden the franchise. The latter argued that the aim of government was to
protect property-owners, and that only people with property ought to have the
vote.

The abolition of
Western slavery is a second case in point. Again the Quakers in Britain of the
seventeenth century are the pioneers. They believed that every human harbored
something of God. That divine part could not be owned by any other than God.
Thus they prohibited slavery among their members. Thomas Clarkson was a
political radical who became convinced that the success of British imperial
trade did not depend on slaves. He was a key figure in shaping the
interdenominational abolition committee in London in 1787 and spent years as a
traveling organizer of local committees with members of various church groups.
William Wilberforce, a conservative evangelical Christian, became the ardent
spokesman in Parliament for this movement against slave trade and slavery. From
1791 and again and again in following parliaments he introduced bills proposing
abolition legislation. In 1807 he prevailed with a good majority. Abolition
then became part of British diplomacy, and gained rapidly in public opinion in
the world. In 1863 in the United States Abram Lincoln issued the Emancipation
Proclamation that led his troops in the Civil War to free most of the
nation's four million slaves. The Thirteenth Amendment, a political document
ratified in 1865, guaranteed that slavery would never again exist in the United
States. What had started as a religious idea became secular law.

A third example of
religious provisions for the body politic is the welfare states of modern
Europe. They are religiously supported arrangement that has become largely seen
as secular. They are, do not think otherwise, products of political struggles
over the distribution of economic, educational, and medical resources. But one
may well assume that the outcome of such struggles would have been different
without a Christian tradition of mercy for the chanceless laid off, sick or handicapped,
and the inherently stupid or the sufferers from incurable severe brain damages,
and others truly unfortunate. The European Continent has had centuries of
religious preaching of heavenly rewards for brotherly love and mercy practiced
in this life. This sets an initial thrust toward welfare as a consistent policy
for those who are too young to take care of themselves, or too old, too sick,
and too down-and-out to fend for themselves. This thrust overcame also an
internal opposition to "socialist" measures by conservatives,
including conservative members of the clergy. The welfare policy could then be
maintained in a secular environment by the processes we have discussed in
Chapter 15 in the section Vocabularies Supporting
Order. It appears, from the European evidence we have so far, that an
extensive welfare policy for the weakest members of society can be kept going
in a long run even when any original religious background is forgotten.

The societal realms of
economy and religion both center on the linguistic category of evaluations,
albeit of different qualities. Economy depends mostly on executive symbols of
evaluation, while religion depends mostly on emotive ones. Since evaluative
motives in both executive and emotive modes have motivational force, it is not
surprising that mankind senses a struggle between Mammon and God.

We know from "The Rules
of Emotive and Rational Choice" (Proposition 4:4) that emotive choice
is the first and default mechanism for mankind. This would argue that religion
obtains dominance in the beginning of a human life cycle. It is indeed a common
saying that "childlike faith" is strong. That the exigencies of
living that meet us beyond the period of parental protection and that they
require executive skills is given. So it stands to reason that Mammon dominates
in this phase of the life cycle. Another part of folk wisdom says that
"when the devil gets old he becomes pious." Death is intensely
emotive and it is not surprising that an emotive realm of society becomes relevant
in old age.

The motivational force
of the economy is strong and so is the force of religion. God and Mammon are
both strong opposition to one another. But imagine what would happen if they
joined forces! It took the genius of Max Weber to even raise the question.

The religious
virtuosos of all religions either rework the everyday world or flee from it
into contemplation. Generally speaking, the relationship of virtuoso
religiosity to everyday life became different in the West and the East.The Western tradition based on the Israeli
prophets was one of acting in the world without being of the world. Weber
describes the relationship thus:

When the religious virtuoso stood out
in the world as a kind of divine `instrument', cut off from all magic means of
salvation, with the demand that he should `prove himself' to be called to
salvation before God — which in effect meant before oneself — by the ethical
quality of his behaviour and, then the `world' could
never so much be devalued and rejected from a religious viewpoint as something
created (animal-like) and as a kind of weak vessel of sin: thus, it came to be
affirmed psychologically even more as the scene of service pleasing to God in
the worldly `vocation'. This asceticism within the world was indeed
world-denying, in the sense that it scorned such values as dignity and beauty,
ecstatic intoxication and glorious dreams, purely worldly power and purely
worldly heroism, rejecting them as competitors to the Kingdom of God. But for
that very reason, it did not flee like contemplation from the world, but wanted
to rationalise the world ethically in accordance with
God's commandments, thus remaining world-oriented in a specifically more
profound sense than the intact human being's naive `affirmation of the world',
for example in ancient times or in lay Catholicism. In everyday life, in
particular, it was to prove that the person advanced in religion was selected,
a recipient of grace — not, it is true, in everyday life as it was, but in
methodically rationalised everyday behaviour in God's service. When everyday behaviour was rationally elevated into a calling, it became
a confirmation of salvation. The sects of religious virtuosos created ferment
in the West for a methodical rationalisation of one's
way of life, including economic behaviour, and not —
like the Asiatic associations of contemplative, orgiastic or apathetic ecstatics — outlets for the longing to escape from the
meaninglessness of acting within the world (Weber 1920, pp
??).

Here is the foundation
of Weber's thesis that sects and churches with Protestant ethics have been a
starting-point for the systematic quest for profitability that is part of the
spirit of capitalism. Methodical religious rationalization of everyday life
underlies the methodical thinking on profitability that is the value
cornerstone of capitalism.

Weber's theses on the
origin of capitalism have been greatly debated and also questioned. His
reasoning is complex, and not all his critics have been able to follow it. One
must realize that both the structural and the value-related factors must be
present in order for rational capitalism to arise. This has been the case only
in the modern Western world.

In the cities of
India, Weber can point to highly advantageous structural conditions: here was a
legal system at least as useful for capitalism as that of mediaeval Europe;
here was rational science; here was a mathematics that should have made
profitability calculations as easy to accomplish as in Europe; here were
organized firms for handicrafts and a division of labor. But the requisite
achievement values were lacking and India developed no domestic form of
capitalism.

In China too, there
were outstandingly favorable conditions for capitalist development. Much that
inhibited capitalism in Europe, such as feudalism and the guilds, did not exist
in China. The economic double standard of morality was defeated by a pragmatic,
worldly religious tradition. Here, there was a cultivated and literate
bureaucracy. But in China the spark that could have kindled capitalism, namely
the motivation that ensues from values concerning obligatory methodical
profitability, was largely lacking.

Only in Europe did the
unique combination exist — but not in the whole of Europe, either. Only where
ascetic Protestantism had put down firm roots were conditions good, for example
among the Calvinists in The Netherlands, the Huguenots in France, the
Methodists in England, the Pietists in Germany and
the Evangelical revivalist movements in the Nordic countries. The
Protestant sects in the United States were clearly a capitalist hothouse.
Nevertheless, there are exceptions difficult to explain: For example, Catholic
northern Italy had only the structural preconditions for capitalism, but its
elites in Venice and Genoa nevertheless rose to the occasion and developed a
flourishing capitalism.